INDUSTRIAL RELATIONS ACTS, 1946 TO 2004
SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990
(REPRESENTED BY IRISH BUSINESS AND EMPLOYERS' CONFEDERATION)
- AND -
IRISH MUNICIPAL, PUBLIC AND CIVIL TRADE UNION
IRISH NURSES ORGANISATION
Chairman: Ms Jenkinson
Employer Member: Mr Grier
Worker Member: Mr Nash
1. Amendments to benefits structure of the Company's Pension Scheme.
2. The Company provides services for people with disabilities and their families and employs approximately 800 workers. Historically the Company was funded under Section 65 of the Health Act through the Health Boards. Now this funding is provided by the HSE. The Company submits budgets annually to seven different areas of the HSE to secure funding for its various services. The Company operated a Defined Benefit Pension Scheme for all employees until the 1st November, 2002 . From that date the Company introduced a Defined Contribution scheme for all staff employed thereafter. The Company contributes 7% of basic salary to this scheme, which is the maximum percentage funding provided by the funding authority (HSE/Department of Health and Children). Employees are required to contribute 6.5 % of salary. The scheme is administered on behalf of the Company by a Board of Trustees. A preliminary valuation of the DB scheme in 2003 showed that the scheme was currently in significant debt and that unless action was taken to reduce benefits or increase the contribution rate considerably the scheme's funding position would deteriorate further. The Company on the 2nd June, 2004, proposed to amend the benefit structure for future service only as follows:
1. Pensionable salaries to be capped so that in the future, pension benefits would be based on pensionable salary adjusted in line with the lower of the rate of increase in salaries or the Consumer Price Index.
2. For future accruals, pensions in the course of payment, would no longer automatically increase in line with the lesser of the rise in the Consumer Price Index or 5% but would in future be at the discretion of the Trustees. Such increases would therefore be dependent on the financial health of the Defined Benefit Scheme.
3 The rate at which members contribute to the Defined Benefit Scheme to be increased from 4.75% of pensionable salary plus 1. 5% of salary to 4.75% of pensionable salary plus 2. 5% of salary, i.e. a 1% increase in employee's contribution.
The Company maintained that the above three recommendations in unison ensured the lowest possible impact on the employees and would have the effect of preserving the existence of the scheme. The Unions engaged in discussions with the Company on the proposed amendments. The Unions sought to have an additional contribution from the exchequer through the funding agency (HSE /Department of Health and Children) but this was not forthcoming. As agreement was not reached the dispute was referred to the Labour Relations Commission. Following a conciliation conference held in October, 2004 the Industrial Relations Officer put forward a proposal to ensure the stability of the Scheme as follows
" Given the circumstances now pertaining particularly the concern of the Trustees in respect of their statutory obligations both Unions will advise their members of the requirement to amend the benefit structure of the scheme as per the Company letter of 2 June, 2004. Both Unions have formally stated that they are consenting to these amendments under protest and without prejudice to their position on the matter as outlined at the conciliation conference and on the understanding that the position will be reviewed after the next actuarial assessment.
In the meantime the issue relating to pension contribution amendment to the benefits structure will be referred by the IRO to the Labour Court for investigation and recommendation".
The dispute was referred to the Labour Court on the 14th October, 2005 in accordance with Section 26(1) of the Industrial Relations Act, 1990. A Court hearing was held on the 18th January, 2006.
3. 1. The difficulties in the Company's pension scheme were caused by insufficient funding. The Company was placed in a position by the funding authorities whereby it could not or was prevented from making any contribution to resolve the issue.
2. There should be an increase in the Company's funding rate which should be facilitated by amending or altering the policy of the funding agencies. Alternatively, the Company and the funding agencies should commence discussions on the possibility of the Company being admitted into the Nominated Health Agencies Superannuation Scheme, a pension scheme which covers nineteen different agencies providing similar services to those performed by Enable Ireland. Additionally the benefit structure should be restored to its original terms and the increased 1% employee contributions should be removed.
3. The funding agencies restriction on the employer's costs being limited to 7% of payroll is unfair and invidious and must be set aside.
4. 1. Both parties agree that the amendments made to the DB pension scheme were required to ensure that the scheme did not wind up during 2004.
2. The Unions accept that the Company is incapable of providing the finance that would have been required to ensure the continuance of the scheme. Despite the Company's and the Unions' best efforts the funding authorities will not increase the level of funding from 7% even though it has been shown to be inadequate.
3. The Company and the Trustees of the Scheme have done everything possible to ensure that the amendments resulted in the lowest possible increase in employee contribution to the Scheme of 1% of salary. The amendments have meant that the scheme is now performing more favourably and is currently not at risk of being wound up. There are, however, still deficits that must be eradicated in the longer term meaning that the interim valuation at the end of January is likely to reveal that there can be no consideration of a review of the amendments at this time.
4. The Company is committed to exerting as much pressure as is necessary on the HSE and the Department of Health and Children to address the deficits in its funding arrangements.
Due to the difficulties experienced in funding its Defined Benefit Pension Scheme and having received extensive professional advice, the Company devised amendments, which changed the benefit structure of the scheme and increased employee contribution levels. The Unions expressed their strong concern at this initiative, however, they reluctantly agreed to the changes as the scheme was in danger of being legally wound up. The Unions referred the issue to the Court seeking restoration of the benefits whilst in the interim both parties explored means to increase the employer's funding allocation to the scheme.
Despite these efforts, the Department of Health and Children would not accept that there was any basis for such additional funding. The employer indicated to the Court that it was not in a position to increase the level of contributions; therefore, it had fallen back on the employees to make up the loss.
From the detail supplied to the Court, the evidence shows that the current funding of 7% of payroll allotted to the scheme is insufficient in the present climate to meet the costs of the pension scheme. Both parties were agreed that this level of funding must be addressed in order to ensure that the matter is not further exacerbated. They indicated their willingness to raise the issue at another forum.
The Court recommends acceptance of the amendments put forward by the Company in order to address the current difficulties, pending changes for the adequate funding of the scheme.
Signed on behalf of the Labour Court
24th January, 2006______________________
Enquiries concerning this Recommendation should be addressed to Tom O'Dea, Court Secretary.