DUBLIN - The Irish pension regulator is poised in the next few weeks to relax funding rules for the country's e50 billion ($49.5 billion) defined benefit schemes, said Anne Maher, chief executive of the Pensions Board, Dublin.
By early this month, the Pensions Board hopes to publish new funding and reporting guidelines for local pension plans following recent discussions with actuaries, trustees and plan sponsors concerned that existing funding rules are damaging pension plans struggling with the bear market.
"We are considering some flexibility in allowing these otherwise fine pension plans to meet the windup rules," said Ms. Maher. The rules now require plan sponsors to provide enough assets to meet liabilities if the plan were to be closed down and members paid their benefits. Actuaries are required to assess plans' funding positions every 3.5 years and funding shortfalls must be made up within that time.
Tinkering with rules
Regulators across Europe similarly are busy tinkering with pension rules to secure the future of domestic pension plans after three years of falling equity markets.
The Dutch pensions regulator - the Pensioen & Verzekeringskamer, Appeldoorn - recently tightened the screws, telling the country's pension plans to lift their funding levels to 105% within the next year and build reserves to accommodate a 40% fall in equity markets. Dutch consultants are concerned the requirements come too late and could further weaken pension plans' funding positions.
The U.K. government in March extended the deadlines under which plan sponsors had to make up any funding shortfall in their pension plans.
And last month the Swiss government cut to 3.25% from 4% the minimum interest rate that pension plans have to match.
Ms. Maher of the Pensions Board said it is possible the shortfall makeup period would be extended. It also is likely the Pensions Board would require actuaries to assess pension plans annually and institute a new funding program if there were any concern about the funding position, she added.
John Feely, chairman of the Irish Pension Funds Association, Dublin, said existing funding requirements were not designed to cope with current market conditions and were forcing plan sponsors to increase contributions to an unsustainable level.
Defined benefit plans might be forced to close down if the current rules are not eased, Mr. Feely warned.
The funding requirements for Irish pension plans should be completely reviewed before any requirement for annual actuarial statements is introduced, he said. Pension plans should be valued as a going concern rather than on a termination basis and plans should be given 10 years to make up funding shortfalls, according to Mr. Feely.
Ms. Maher said she is concerned that regulatory costs for defined benefit pension plans not be increased at a time when many plan sponsors, particularly those in the United Kingdom, are under pressure to switch to defined contribution systems.
"We want a situation where the funding position is known and transparent. Our primary concern is to secure the member interests," Ms. Maher said.
She added that relaxing funding rules for pension plans was no more risky for members than raising the risk of widespread closure of defined benefit plans by tightening the regulatory screws on plan sponsors.