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U.K. seeks input on liability payment deferrals for multiemployer DB plans

The U.K. government is seeking comment on a change to regulation that would allow employers within multiemployer defined benefit funds to defer paying up their share of the liabilities when they no longer have active participants in the plan.

Any such deferral would require the employer retains all previous responsibilities to the pension fund, said the government in a consultation paper.

When an employer leaves a multiemployer fund, they are liable to pay their full share of liabilities, the so-called Section 75 debt.

The proposed change follows a comment period, in March 2015, on Section 75 employer debt in non-associated multiemployer funds.

Those responses largely called for a change to the employer debt regime, thereby helping sponsoring employers in non-associated multiemployer funds to manage debts that arise when a participating employer ceases to have active participants, at a time when at least one other sponsoring employer in the multi-employer fund has active participants.

The Pensions and Lifetime Savings Association welcomed the consultation, and said it is vital. “This issue impacts on some of the U.K.’s largest DB schemes as well as being a particular concern for many charities participating in multiemployer schemes,” said Joe Dabrowski, head of investment and governance at the PLSA, in a reaction statement Monday. “Under the current regime, companies that do not wish to maintain active membership in the scheme are forced to do so unless they are able to pay the Section 75 employer debt. While this may not be a problem for some organizations, for others this might mean being threatened by insolvency if they ceased active membership.”

Mr. Dabrowski said the proposals could make the DB system more sustainable by allowing better risk management.

The government is seeking comment from pension fund industry bodies and professionals, trustees of managers of pension funds, participants and beneficiaries, employers and representative organizations, and other interested parties. The consultation runs until May 18, and the paper is available on the Department for Work and Pensions’ website.