Omega Pharma case may force Ireland to re-evaluate funding standard

first_imgIreland’s government and regulator could be forced to re-evaluate the minimum funding standard (MFS) for defined benefit (DB) schemes after a court case ruled it was reasonable for trustees to request funding above the minimum threshold.According to Martin Clarke, a partner at LCP’s Dublin practice, the recent High Court ruling in favour of the Omega Pharma trustees and a second case that granted a contribution request have created a new framework for trustees to work within. He added that, as long as trustees were seen to be working within the trust deed and acting reasonably, they appeared to be winning cases against reluctant sponsors.Clarke said that while only pensions in payment were offered near buyout certainty, trustees realise the MFS is an “unreasonably low” guarantee to be offering other members. He said the Omega Pharma ruling, which saw trustees granted a request for €2.23m in contributions despite the scheme being fully funded under the statutory minimum, was “almost an acceptance” that the MFS was an inappropriate basis for calculating solvency.“If the MFS is not an appropriate basis, and the court seems to be taking the view – or certainly not objecting to the view that it’s an inappropriate basis – should there not be some kind of pushback on the legislator to change it?” he asked. “Should we not have a basis that is generally acceptable as our minimum?”However, the feasibility of amending the MFS was also called into question, as the Pensions Board – now operating as the Pensions Authority – is still reviewing funding proposals after the MFS was reinstated following the financial crisis.Clarke said he was unsure if there was a “practical appetite” within the government to amend the MFS, despite previous admissions from minister for Social Protection Joan Burton that it was an “undemanding” standard, as alleged by the OECD following a review of the country’s regulatory framework.“Even if there was an appetite [to revise the MFS], they would be reluctant to impose it, as it would drive more schemes into technical insolvency,” he said.last_img

Leave a Reply

Your email address will not be published. Required fields are marked *