Confirming the statutory employer – What trustees need to do

It is vital trustees of Defined Benefit (DB) pension plans understand the level of support that employers are legally obliged to provide and investigate and monitor the extent to which those obligations can be met.

The new requirement from November 2011 for trustees of DB plans to provide extra information to the Pensions Regulator in Scheme Returns forces them to review where they should be focusing their attention with regard to this important trustee duty.

Trustees will have to confirm which employers are statutory employers and this may or may not be the principal and participating employers. Accompanying guidance confirms statutory employers, for these purposes, are employers that are legally responsible for ALL of the following:
• meeting the funding objective of the pension plan
• paying the debt under section 75 of the Pensions Act 1995, when an employment cessation event occurs on an employer departure from a multi-employer pension plan, on wind up or on employer insolvency
• triggering entry to a PPF assessment period on insolvency.

Statutory employers may not be the only employers with a liability to the plan. Employers who do not satisfy all of the statutory employer requirements should still be listed on the Scheme Return as participating employers. Group entities who have a separate contractual commitment to the plan, perhaps through a parent company guarantee, will retain their liability but will not be classified as a principal or participating employer for the purposes of the Scheme Return.

We recommend that trustees take urgent action to identify their statutory employer(s). In practical terms, such action is likely to involve reviewing plan documentation, historic payroll and other records.

Bearing in mind civil penalties can be imposed for failing to take reasonable steps to provide complete and accurate information to the Pensions Regulator this is a task that should be started as soon as possible.

Your Pi Consulting contact will be pleased to assist you in identifying how to go about this.