It is not clear that there will be any immediate significant legal implications for Irish occupational pension schemes of the UK exiting the EU. However, the effect on the investment market and the continued uncertainty around Brexit is likely to have more immediate and significant consequences for Irish defined benefit schemes and their sponsoring employers.

Many Irish defined benefit schemes are struggling with funding proposals that have gone off or may go off track as a result of poor market conditions. In addition, funding difficulties (and their associated impact on IAS liabilities of sponsoring employers) may trigger fresh scheme reviews and renewed focus on liability (and volatility) management.

Trustees and sponsors will need to consider with their investment and actuarial advisers what can be done to mitigate the risk of continued poor market performance in light of ongoing uncertainty during the proposed transition period. As required by the Pension Authority’s financial management guidelines, an important step will be identifying the main risks schemes are exposed to and what contingency plans can be put in place to reduce any negative impact. A general review of the scheme investment strategy and investment options may also be warranted.
Continue Reading Implications of Brexit for Irish Occupational Pension Schemes

What is the Omega Pharma case?

The Omega Pharma case has confirmed that the scheme’s governing documentation and not the Pensions Act minimum funding standard determine the employer’s liability to contribute to defined benefit schemes on wind-up.

On 25 July 2014, Mr Justice Moriarty in the Commercial Court handed down judgment in the case of Holloway & Ors v Damianus BV & Ors [2014] IEHC 383 and found in favour of the trustees of the Omega Pharma defined benefit scheme in their claim for deficit contributions against the scheme’s employers. The trustees succeeded in obtaining judgment in the amount of €2,439,193.56 (inclusive of interest) against the employers. On appeal, the newly established Court of Appeal affirmed the judgment in favour of the trustees (Holloway & ors -v- Damianus BV & ors [2015] IECA 19).

If the Element Six case (Greene & Ors v Coady & Ors [2014] IEHC 38) was the most important pensions law case for trustees in the recent past, the Omega Pharma case was not far behind. The Omega Pharma case is also particularly relevant to employers who operate or participate in defined benefit schemes. However, a number of key issues remain unanswered.
Continue Reading The Omega Pharma case – Trustee and Employer Guidance

On Friday last, Justice Moriarty delivered his judgment in the case of Holloway & Ors v Damianus BV & Ors (Record No. 2013/6239P).

This case arose out of a contribution demand issued by the trustees of a defined benefit pension scheme in 2012. The demand was issued following the service by the principal employer of three months’ notice terminating its liability to contribute as provided for under the rules of the scheme. When the principal and associated employers failed to pay the amount due on foot of the contribution demand (€2.23 million), the trustees issued proceedings seeking to enforce payment in the High Court.

In considering whether or not the trustees could, or indeed should, have made the contribution demand, Justice Moriarty noted the previous comments of Justice Charleton in Green and Ors v Coady and Ors and, in particular, his comment that:-

“once trustees had acted honestly and in good faith, taking into account all relevant considerations and excluding irrelevant ones, the appropriate standard for review of their decisions is whether no reasonable body of trustees could have come to the same decision”.

Based on this standard of review, Justice Moriarty held that the decision of the trustees to issue a contribution demand did not appear to be one which no reasonable body of trustees would have made. Justice Moriarty also noted that the trustees, in conjunction with the scheme’s actuary, had sought to identify a reasonable basis of valuation with a view to providing the benefits under the scheme and that the trustees appeared to have been acting in good faith and in the best interests of members in accordance with their fiduciary responsibilities.

In those circumstances, the Court held that the trustees were entitled to succeed in their claim. A copy of this judgement will be available in the coming days on the High Court’s website – www.courts.ie.

As more and more sponsors of defined benefit schemes are preparing to terminate contributions to their schemes or are going into receivership, examinership or liquidation, a question which keeps arising for trustees is whether or not they are under a duty to demand payment of the scheme’s deficit.

When trustees either know or have a justifiable belief that the sponsor of their defined benefit scheme is about to terminate its contribution liability or suffer an event of insolvency, our view is that the trustees need to take immediate action. The first thing they need to do is to look at the scheme’s employer contribution rule and the winding-up provisions and see what powers they have.  Only then can they decide what to do. 

Continue Reading Trustee contribution demands: is there a duty to make them?