Labour Court Database __________________________________________________________________________________ File Number: CD923 Case Number: AD92129 Section / Act: S13(9) Parties: TARA MINES - and - A WORKER |
Appeal by the worker against Rights Commissioner's Recommendation No. C.W. 71/91 concerning the Income Continuance Plan (ICP) and Pension Plan entitlements of a worker.
Recommendation:
The Court has given careful consideration to all aspects of the
appeal and has concluded that the appellant is in receipt of his
correct entitlements under the Pension and Income Continuance
Schemes at present provided by the Company.
The Court accordingly rejects the appeal and upholds the Rights
Commisisoner's Recommendation.
The Court so decides.
Division: Ms Owens Mr Brennan Mr Walsh
Text of Document__________________________________________________________________
CD923 APPEAL DECISION NO. AD12992
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 13(9), INDUSTRIAL RELATIONS ACT, 1969
PARTIES: TARA MINES
and
A WORKER
SUBJECT:
1. Appeal by the worker against Rights Commissioner's
Recommendation No. C.W. 71/91 concerning the Income Continuance
Plan (ICP) and Pension Plan entitlements of a worker.
BACKGROUND:
2. 1. The worker concerned was born in 1941. He was
employed by the Company as an engineer in 1975. During
his employment on the Company's mining operations he
suffered injuries to his back and was hospitalised in
1979. He returned to work but his back injuries
re-occurred in June, 1985 when he was again hospitalised.
As a result of his injuries he became permanently disabled
and was unable to continue with his employment. On 25th
July, 1986 the Company informed the worker that his
employment would be terminated with effect from 31st
October, 1986. Since then the worker has received
payments under the I.C.P.. The worker will reach 65 years
of age in the year 2006 when he will be entitled to
receive a pension under the Pension Plan.
2. 2. In 1980 the Company introduced the I.C.P. for
full-time salaried staff. The full cost of the benefits
provided under the I.C.P. is paid for by the Company. If
a worker becomes disabled before his normal pension date
(at 65 years of age) the I.C.P. provides an annual income
equal to 75% of annual salary (less state disability
benefit). The I.C.P. includes the following provisions
for workers who are disabled before normal pension date:-
"This income will commence after 52 weeks of
continuous disablement and will continue for as
long as the disablement lasts but not later than
your normal pension date or your death if earlier.
It will be paid by the Company, at its discretion,
to you as salary and will thus qualify for the
normal tax reliefs under the P.A.Y.E. system.
The income increases by 5%p.a. compound during
disability, the first increase being effective
after payment of the benefit for 12 months.
In addition, the Income Continuance Plan would
provide an amount which would maintain the level
of contributions payable under the Pension Plan at
the point of disability. This amount will be
utilised towards maintaining contributions to the
Company's Pension Plan in order that Death in
Service and Pension Benefits continue to
accrue."
The worker is paid I.C.P. on the basis of his June, 1985
salary. He has two claims in relation to his I.C.P.
payments:-
Claim A
I.C.P. should be based on the worker's January,
1986 salary when his disability occurred rather
that his June, 1985 salary.
Claim B
The Company paid a sum each month towards the
worker's Voluntary Health Insurance (V.H.I.)
premium. The worker claims that this payment is
part of his basic pay and should be included in
calculating his basic salary for I.C.P. purposes.
(the Company did not include its payment towards
V.H.I. in calculating basic pay).
The Company state that the worker is receiving his
correct entitlements under the I.C.P.
2. 3. The Company also introduced a pension plan in 1980 for
full-time staff. The pension plan is paid for by
contributions from the Company and deductions from the
salary of workers at the rate of 5% of pensionable salary.
At retirement on normal pension date (aged 65 years) a
pension based on 1/60th of final pensionable salary for
each year of pensionable service is paid. If a worker
leaves the service of the Company other than on retirement
the following conditions apply:-
"If your employment is terminated by the Company
through no fault of your own (e.g. redundancy), or
you leave service of your own free will but after
having completed at least 5 years' service with
the Company, you will be entitled to a deferred
pension, commencing on your normal pension date.
The amount of the deferred pension will be
calculated as
Pensionable Salary (at date of leaving) X N/60
Where N is completed continuous years of company
service from 1st July coincident with or next
following attainment of age 24, up to the date of
leaving service.
You may elect, after your withdrawal from the
Service of the Company, and having been granted a
deferred pension, to take a reduced pension before
your normal pension date on grounds of incapacity
due to ill-health or injury, or (for other
reasons) after you have attained 55 years of age.
As an alternative to the deferred pension, you may
take a refund of your contributions (subject to a
deduction equivalent to the tax liability due by
the Administrator; at present, the rate of tax is
10% of the gross refund)."
The pension plan also provides for Death Benefits which
include the payment of a lump sum and spouse's pension.
2. 4. When the worker queried the amount of pension he would
receive in 2006 (at age 65 years), he was informed that, in
the event of his remaining on I.C.P. to retirement age, he
would receive a pension based on 31/60th of his salary in
1986. The worker has two claims in relation to his
entitlements under the pension plan:-
Claim C
That the worker's retirement pension should be
calculated on the basis of his salary at
disablement escalated at the annual rate of 5% up
to age 65, to which the 31/60th formula is
applied.
Claim D
Death Benefit should also be calculated on
escalating salary as in Claim C, rather than on
the basis of salary at 1986.
The Company state that the worker's retirement pension and
death benefit entitlements are calculated in accordance
with the provisions of the pension plan.
2. 3. The dispute was referred to a Rights Commissioner who
investigated it on 18th June, 1991 and issued the following
recommendation on 2nd December, 1991:-
"I recommend that the worker accepts that he is in
receipt of correct benefits under the Pension and
income Continuance Plans."
(The worker was named in the recommendation)
The worker appealed against the recommendation under
Section 13(9) of the Industrial Relations Act, 1969. The
Labour Court heard the appeal in Navan on 23rd January,
1992.
WORKER'S ARGUMENTS:
3. 1. The main area of disagreement is in relation to the
pension plan. The worker's basic claim in respect of
claims C and D is that the benefits of the pension plan
should escalate yearly. The Company is attempting to
freeze the worker's pension plan benefits at 1986 rates.
2. The I.C.P. provides that benefits will increase by 5%
per annum compound during disability and that
"In addition the Income Continuance Plan would
provide an amount which would maintain the level
of contributions payable under the Pension Plan at
the point of disability. This amount will be
utilised towards maintaining contributions to the
Company's Pension Plan in order that Death in
Service and Pension Benefits continue to accrue."
There are sufficient funds provided by the I.C.P. to
provide for the total package of "escalating benefits" for
the worker. This is not only fair and legitimate but it
will cost the Company nothing as the money is provided by
the I.C.P.
3. It is universal practice that, where there is an
escalation clause in the I.C.P. and where there is a
pension contribution cover as well, contributions should
increase by the same rate (i.e. 5% in this instance). It
is clearly contrary to good modern practice to provide a
pension which is related to earnings some 20 years before
pension payment date.
4. The worker considers that he is still an employee of
the Company. The Company has given credit for years of
active service plus the years during which he would
continue to receive I.C.P., making a total of 31 years.
This gives a pension based on 31/60 ths of pensionable
salary at commencement of his disability. However there is
no protection to the worker as and from the year 2006 for
the loss of purchasing power through inflation.
5. In relation to the worker's claim in respect of his
I.C.P. benefits, claim A is based on the fact that the
worker returned to work in September, 1985 (after
re-hospitalisation in June, 1985) and worked until January,
1986 when his present diability commenced. The Company is
using the worker's June, 1985 salary as the basis for his
I.C.P. despite the fact he worked until January, 1986.
6. In relation to Claim B, during his employment the
worker was paid a sum each month called "V.H.I. sub" as
part of his normal salary. This V.H.I. payment was part of
his basic salary and should be included in calculating his
basic salary for I.C.P. purposes.
COMPANY'S ARGUMENTS:
4. 1. After the termination of the worker's employment he
sought details of his entitlements under the pension plan
and the I.C.P. Every effort was made to explain these to
him on many occasions. The Company is satisfied that the
worker's entitlements have been calculated correctly. The
Rights Commissioner's Recommendation should be upheld.
2. The position in relation to the worker's pension
entitlements is as follows. On termination of the worker's
employment on 31st October, 1986 he was entitled under the
rules of the pension plan to 12/60ths of his pensionable
salary at the date of leaving (to be paid at age 65). The
rules state a worker will be entitled to a deferred
pension, commencing on normal pension date, calculated as
follows:-
Pensionable Salary (at date of leaving) X N/60
Where N is completed continuous years of company
service from 1st July coincident with or next
following attainment of age 24, up to the date of
leaving service.
However the I.C.P. provides for the following:-
In addition, the Income Continuance Plan would
provide an amount which would maintain the level
of contributions payable under the Pension Plan at
the point of disability. This amount will be
utilised towards maintaining contributions to the
Company's Pension Plan in order that Death in
Service and Pension Benefits continue to accrue.
This provision maintains pension contributions for the
years the worker receives I.C.P. until age 65 (i.e. 19
years) plus his 12 years of active service. Using the
formula for calculating deferred pension the provisions of
the I.C.P. provides the worker with a pension equivalent to
31/60ths of pensionable salary at date of leaving.
3 In relation to claim C in respect of pension
entitlements, the I.C.P. provides for a deferred pension of
31/60 of pensionable salary as detailed above. There is no
provision for "escalating benefits" under the pension plan.
There is provision in the I.C.P. for "escalating benefits"
(i.e. income increases by 5% per annum during disability)
but this provision does not apply to the pension plan.
4. In relation to Claim D, the worker is entitled to
Death in Service benefits based on his pensionable salary
at the date of disablement. The provisions in the I.C.P.,
as in the case of Claim C, provide for the maintenance of
contributions to Death in Service benefits but do not
provide for escalating benefits.
5. In relation to Claim B, under the terms of the I.C.P.
salary is the annual rate of basic salary excluding
overtime bonus or other variable payments. The Company
does not accept that a subsidy to the worker's V.H.I.
contributions should be included in the calculation of
basic pay for I.C.P. purposes.
6. In relation to Claim A, according to the worker's
I.C.P. claim he was disabled from June, 1985. The Company,
therefore, based his I.C.P. on his salary of that date. As
payments under the I.C.P. commence 52 weeks after
disablement the Company kept the worker on the payroll
until October, 1986 so that no undue hardship would be
caused until he received I.C.P.
7. It is up to the trustees to look after the pension
plan on behalf of the workers and the Company. The
trustees act as an independent and experienced protector of
both the rights of the workers and the Company. The
worker's entitlements have been correctly calculated in
accordance with the provisions of the pension plan and the
I.C.P.
DECISION:
The Court has given careful consideration to all aspects of the
appeal and has concluded that the appellant is in receipt of his
correct entitlements under the Pension and Income Continuance
Schemes at present provided by the Company.
The Court accordingly rejects the appeal and upholds the Rights
Commisisoner's Recommendation.
The Court so decides.
~
Signed on behalf of the Labour Court
Evelyn Owens
_______________________
23rd March, 1992
A.S./N.Ni.M. Deputy Chairman