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The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2018

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Citation and commencement

1.—(1) These Regulations may be cited as the Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2018.

(2) These Regulations come into force on 6th April 2018.

Amendments to the Occupational Pension Schemes (Employer Debt) Regulations 2005

2.  The Occupational Pension Schemes (Employer Debt) Regulations 2005(1) are amended in accordance with regulations 3 to 11.

Amendments to regulation 2

3.—(1) Regulation 2 (interpretation) is amended as follows.

(2) In paragraph (1)—

(a)after the definition of “the corresponding assets”(2) insert—

“deferred debt arrangement” means an arrangement that takes effect in accordance with regulation 6F(3);;

(b)in the definition of “employer”(4), after “6,” insert “6A, 6F,”;

(c)after the definition of “frozen scheme”(5) insert—

“the FSD Regulations” means the Pensions Regulator (Financial Support Directions etc.) Regulations 2005(6);.

(3) In paragraph (3A)(7) in the definition of “receiving employer” for sub-paragraph (b)(ii) substitute—

(ii)not associated but falls within paragraph (3B)(8),.

(4) After paragraph (3A), insert—

(3B) An employer falls within this paragraph where it is—

(a)a limited company, limited partnership or limited liability partnership;

(b)a charitable company; or

(c)a CIO.

(3C) For the purposes of paragraph (3B)—

(a)“charitable company”—

(i)in relation to England and Wales, has the meaning given by section 193 of the Charities Act 2011(“the 2011 Act”)(9); and

(ii)in relation to Scotland, has the meaning given by section 112 of the Companies Act 1989(10);

(b)CIO”—

(i)in relation to England and Wales, means a charitable incorporated organisation within the meaning of Part 11 of the 2011 Act; and

(ii)in relation to Scotland, means a Scottish charitable incorporated organisation within the meaning of section 49 of the Charities and Trustee Investment (Scotland) Act 2005(11);

(c)“limited company” has the meaning given by section 3(1) of the Companies Act 2006(12)Act;

(d)“limited liability partnership” has the meaning given by section 1(2) of the Limited Liability Partnerships Act 2000(13); and

(e)“limited partnership” has the meaning given by section 4 of the Limited Partnerships Act 1907(14).

(3D) (3D) Where regulation 6F(6)(f) applies, the definitions of “exiting employer” and “receiving employer” in paragraph (3A) shall be deemed to include deferred employers..

(5) After paragraph (4D)(15) insert—

(4E) For the purposes of these Regulations “deferred employer” in relation to a multi-employer scheme means a person—

(a)who formerly employed at least one active member of the scheme in respect of whom defined benefits were accruing;

(b)in respect of whom a relevant event has not occurred; and

(c)who—

(i)has proposed to the trustees or managers of the scheme to enter into a deferred debt arrangement; and

(ii)having made that proposal, is participating in a deferred debt arrangement..

Amendments to regulation 6ZA

4.  In regulation 6ZA(1)(c)(employment-cessation events: general)(16) for “regulation 6A” substitute “regulations 6A and 6F”.

Amendments to regulation 6A

5.—(1) Regulation 6A (employment-cessation events: periods of grace)(17) is amended as follows.

(2) In paragraph (1)—

(a)for “2 months” substitute “3 months”;

(b)in sub-paragraph (a), after “scheme” insert “or enters into a deferred debt arrangement”;

(c)for sub-paragraph (b) substitute—

(b)if at any time during the period of grace A—

(i)no longer intends to employ any person who will be an active member of the scheme; or

(ii)does not intend to enter into a deferred debt arrangement by the last day of the period of grace,

A must notify the trustees or managers of the scheme and A must be treated as if the period of grace had not applied;.

(3) In paragraph (2), after “these Regulations” insert “and regulation 16 of the FSD Regulations (multi-employer schemes)”.

Amendments to regulation 6E

6.—(1) Regulation 6E (flexible apportionment arrangements)(18) is amended as follows.

(2) In paragraph (1) for “A flexible” substitute “Except in the case of a frozen scheme, a flexible”.

(3) In paragraph (1)(b)—

(a)at the end of sub-paragraph (i) insert “or”; and

(b)at the end of sub-paragraph (ii) for “applied; or” substitute “applied.”.

(4) Omit paragraph (1)(b)(iii) and after paragraph (1) insert—

(1A) Where the scheme is a frozen scheme, the flexible apportionment arrangement takes effect on the date on which the conditions in paragraph (2) are met..

Insertion of new regulation 6F

7.  After regulation 6E insert—

Deferred debt arrangement

6F.(1) A deferred debt arrangement takes effect on the date on which the trustees or managers of the scheme, being satisfied that the conditions in paragraphs (2) and (3) are met, consent in writing to the arrangement.

(2) The condition in this paragraph is that an employment-cessation event—

(a)has occurred in relation to the deferred employer before the date on which the conditions in paragraph (3) are met; or

(b)would have occurred in relation to the deferred employer if the deferred employer had not entered into and remained in a period of grace in accordance with regulation 6A until immediately before the date on which the deferred debt arrangement is to take effect.

(3) The conditions in this paragraph are—

(a)the scheme is not in an assessment period within the meaning of Part 2 of the 2004 Act (the Board of the Pension Protection Fund) or being wound up; and

(b)the trustees or managers of the scheme are satisfied that—

(i)an assessment period is unlikely to begin in relation to the scheme within the period of 12 months beginning with the date on which the trustees or managers expect the deferred debt arrangement to take effect; and

(ii)the deferred employer’s covenant with the scheme is not likely to weaken materially within the period of 12 months beginning with the date on which the trustees or managers expect the deferred debt arrangement to take effect.

(4) A deferred employer must be treated during the period that the deferred debt arrangement is in place—

(a)as if employing at least one person who is an active member of the scheme; and

(b)for the purposes of these Regulations and regulation 16 of the FSD Regulations (multi-employer schemes), as an employer in relation to the scheme.

(5) Where a deferred debt arrangement is in place the deferred employer must be treated as if the employment-cessation event in paragraph (2) had not, or would not have, occurred.

(6) The deferred debt arrangement terminates on the first date on which one of the following events occurs—

(a)the deferred employer commences employing a person who is an active member of the scheme;

(b)the deferred employer and the trustees or managers of the scheme agree that an employment-cessation event shall be treated as having occurred for the purposes of bringing the deferred debt arrangement to an end in relation to the deferred employer;

(c)a relevant event occurs in relation to the deferred employer;

(d)all the employers in the scheme have experienced a relevant event or have become deferred employers;

(e)the scheme commences winding up;

(f)the deferred employer restructures, unless—

(i)the restructuring falls within either regulation 6ZB (employment-cessation events: exemptions) or regulation 6ZC; and

(ii)where the receiving employer is a deferred employer, the trustees or managers of the scheme are satisfied that the conditions in paragraph (3) are met;

(g)a freezing event as defined in regulation 9(2)(b)(frozen schemes and former employers) occurs in relation to the scheme;

(h)the trustees or managers of the scheme serve a notice on the deferred employer stating that the deferred debt arrangement has come to an end on the grounds that the trustees or managers of the scheme are reasonably satisfied that—

(i)the deferred employer has failed to comply materially with its duties under the Scheme Funding Regulations;

(ii)the deferred employer’s covenant with the scheme is likely to weaken materially in the next 12 months; or

(iii)the deferred employer has failed to comply materially with its duties under regulation 6 (duty to disclose information) of the Occupational Pension Schemes (Scheme Administration) Regulations 1996(19).

(7) For the purposes of these Regulations where—

(a)an event referred to in paragraph (6)(a) or (e) of this regulation occurs, the deferred employer must be treated as if the employment-cessation event in paragraph (2) had not, or would not have, occurred;

(b)an event referred to in paragraph (6)(b), (c), (d) or (h) of this regulation occurs, the date of that event must be treated as the date of the employment-cessation event in relation to the deferred employer;

(c)the deferred employer restructures in circumstances where—

(i)paragraph (6)(f) of this regulation does not apply, the date of the restructuring must be treated as the date of the employment-cessation event in relation to the deferred employer;

(ii)paragraph (6)(f) of this regulation applies—

(aa)if the receiving employer is not a deferred employer, paragraph (6)(a) of this regulation applies to the receiving employer; and

(bb)if the receiving employer is a deferred employer, the deferred debt arrangement must continue;

(d)a freezing event referred to in paragraph (6)(g) of this regulation occurs, the deferred employer—

(i)becomes a former employer in relation to the scheme for the purposes of regulation 9 (frozen schemes and former employers); and

(ii)must be treated as if the employment-cessation event referred to in paragraph (2)(a) had not, or would not have, occurred and the deferred debt arrangement had never taken effect..

Amendments to regulation 8

8.  For paragraph (2)(a)(i) of regulation 8 (single employer sections, multi-employer sections etc.)(20), substitute—

(i)any contributions payable to the scheme by an employer in relation to the scheme, or by a member in employment under that employer, are allocated to that employer’s section, or if more than one section applies to that employer, to the section which is appropriate in respect of the employment in question; and.

Amendments to regulation 9

9.—(1) Regulation 9 (frozen schemes and former employers)(21), is amended as follows.

(2) In paragraph (2)(a) after “scheme relates” insert—

and, in the case of a frozen scheme includes any person who employed persons in the description of employment to which the scheme relates immediately before the relevant time,.

(3) After paragraph (3) insert—

(3A) Where a scheme which has one or more deferred employers experiences a freezing event as defined in paragraph (2)(b), the deferred employers must all be treated as if they have ceased to employ persons in the description of employment to which the scheme relates immediately before the relevant time..

Amendments to Schedule 1B

10.—(1) Paragraph 2 of Schedule 1B (notifiable events)(22) is amended as follows.

(2) In sub-paragraph (1)—

(a)in sub-paragraph (b) for “effect.” substitute “effect; or”;

(b)after sub-paragraph (b), insert—

(c)a deferred debt arrangement taking effect; or

(d)any event which terminates a deferred debt arrangement in accordance with regulation 6F(6)..

(3) In sub-paragraph (2) for “the making of the decision” substitute “the trustees or managers of the scheme make the decision or become aware of the event.”.

Insertion of new regulation 19

11.  After regulation 18 (consequential amendments) insert—

Review

19.(1) The Secretary of State must from time to time—

(a)carry out a review of the regulatory provision contained in regulation 6F of these Regulations; and

(b)publish a report setting out the conclusions of the review.

(2) The first report must be published before 6th April 2023.

(3) Subsequent reports must be published at intervals not exceeding five years.

(4) Section 30(4) of the Small Business, Enterprise and Employment Act 2015(23) requires that a report published under this regulation must, in particular—

(a)set out the objectives intended to be achieved by the regulatory provision referred to in paragraph (1)(a);

(b)assess the extent to which those objectives are achieved;

(c)assess whether those objectives remain appropriate; and

(d)if those objectives remain appropriate, assess the extent to which they could be achieved in another way which involves less onerous regulatory provision.

(5) In this regulation, “regulatory provision” has the same meaning as in sections 28 to 32 of the Small Business, Enterprise and Employment Act 2015 (see section 32 of that Act)..

Amendments to the Occupational Pension Schemes (Scheme Funding) Regulations 2005

12.—(1) Schedule 2 of the Occupational Pension Schemes (Scheme Funding) Regulations 2005 (modifications of the Act and Regulations)(24) is amended as follows.

(2) After paragraph 3A (employers in periods of grace) insert—

Period of grace followed by a deferred debt arrangement

3B.  In a case where a period of grace is immediately followed by a deferred debt arrangement as the result of the trustees or managers of the scheme being satisfied that the conditions in regulation 6F(2)(b) and (3) of the Occupational Pension Schemes (Employer Debt) Regulations 2005 are met, the period of grace and the deferred debt arrangement are to be treated as one continuous period of time for the purposes of Part 3 of the 2004 Act and these Regulations.

Employers in deferred debt arrangements

3C.(1) This paragraph applies where a deferred employer is treated under regulation 6F(4) of the Occupational Pension Schemes (Employer Debt) Regulations 2005 (deferred debt arrangement) as if it employed at least one person who is an active member of a scheme.

(2) Where this paragraph applies, Part 3 of the 2004 Act and these Regulations are modified so that references to “employer” include a reference to a deferred employer.

(3) This paragraph ceases to apply where the deferred debt arrangement referred to in regulation 6F of the Occupational Pension Schemes (Employer Debt) Regulations 2005 in respect of the deferred employer comes to an end in accordance with that regulation.

3D.  For the purposes of paragraphs 3B and 3C—

“deferred debt arrangement” and “deferred employer” have the meanings given in regulation 2(1) (interpretation) of the Occupational Pension Schemes (Employer Debt) Regulations 2005..

Signed by authority of the Secretary of State for Work and Pensions

Guy Opperman

Parliamentary Under Secretary of State

Department for Work and Pensions

22nd February 2018

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