Hogan Lovells

Key Dates

Consultation paper and draft regulations issued on 21 April 2107.

Consultation response and final regulations issued on 26 February 2018.

The Occupational Pension Schemes (Employer Debt) (Amendment) Regulations 2017/237 in force on 6 April 2018.


Summary

The DWP has issued a consultation response and final regulations to introduce a new option for dealing with section 75 debts where an employer in a multi-employer scheme undergoes an employment cessation event.

As a reminder, an employment cessation event will occur in relation to an employer in a multi-employer scheme if the employer ceases to employ an active member at a time when another employer (other than a defined contribution employer) continues to employ at least one active member. A debt under section 75 Pensions Act 1995 becomes due from the employer which underwent the employment cessation event.

Under the new option, to be known as a "deferred debt arrangement", payment of the section 75 debt arising on an employment cessation event may be deferred. Instead, the employer will continue to be treated as if it employed an active member, including remaining liable for to pay contributions under the scheme specific funding regime and retaining responsibility for its share of any orphan liabilities.

The deferred debt arrangement will sit alongside existing options to manage employer debts which arise when an employer in a multi-employer ceases to employ an active member.

Trustees must give notice of a decision to enter a deferred debt arrangement, and of any event which terminates such an arrangement, to the Pensions Regulator.

Conditions for a deferred debt arrangement

A deferred debt arrangement can take effect where an employment cessation event has occurred in relation to an employer (or would have occurred if the employer had not immediately entered a period of grace) and the following conditions are met.

Ending a deferred debt arrangement

Following concerns raised in consultation, the regulations relating to the termination of a deferred debt arrangement have been amended. 

A deferred debt arrangement will be terminated if:

A deferred debt will also terminate in the following circumstances, in which case the employer will be treated as having undergone an employment cessation event (meaning that an employer debt will become due if the scheme is underfunded):

Other technical amendments

The draft regulations also make certain other technical amendments to the employer debt legislation, including the following:



Date Accessed: 03/12/2021