FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : MAXOL LTD - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Mr Duffy Employer Member: Mr Murphy Worker Member: Ms Ni Mhurchu |
1. Maxol Defined Benefit Pension Scheme
BACKGROUND:
2. The case concerns a dispute between the parties in relation to their failure in reaching agreement on the top up mechanism of the Defined Benefit (DB) scheme in advance of the winding up of the scheme which currently involves 22 active members and 19 deferred. The funding of the scheme has been in severe difficulty for a period of time and both parties have previously negotiated with the objective of trying to reach agreement with regards to the future of the scheme.With a current shortfall of €8.7 million in the fund, the Company are of the view that the most feasible and manageable solution is to wind up the scheme and in doing so to provide each member with a transfer value that would be invested in their Defined Contribution (DC) scheme and to extend the Company's retirement age from 60 to 65. The Union contends that if the scheme is to be wound up by agreement, the Company must provide a fair and equitable solution in addressing the current deficit in the fund and in doing so to increase the ever decreasing transfer value from its present day value of 10%. The dispute could not be resolved at local level and was the subject of a Conciliation Conference under the auspices of the Labour Relations Commission. As agreement was not reached, the dispute was referred to the Labour Court on 12th April 2010, in accordance with Section 26(1) of the Industrial Relations Act 1990. A Labour Court hearing took place on the 25th June 2010.
UNION'S ARGUMENTS:
1. It is unreasonable of the Company to expect existing members of the DC scheme that are not associated with the struggling DB scheme to make significant concessions so that the company may attempt to address the shortfall affecting active members of the DB scheme. Any increase to the fund would be made at the expense of active members.
2. In extending its retirement age, the Company are allowing themselves more time for their figures to reflect what members would have received at a retirement age of 60 however its members would now not receive such an amount until the age of 65. Current members have been under the impression that they would retire at 60 with the same pension and lump sum amount that they will now not receive until the age of 65.
3. In the current economic climate there are a number of employers that have also faced a deficit issue and have proposed to maintain their members' existing defined benefit scheme as well as commit to paying members' pension service over a period of time. The Union believe it is not unreasonable to expect the Company to do so also.
COMPANY'S ARGUMENTS:
1. The Company has endeavoured to maintain the DB scheme and has in more recent years invested huge amounts of money into the scheme. However, despite its best efforts and the efforts of employee contributions the Company concede that it is no longer sustainable and therefore the most manageable solution is to wind up the scheme.
2. In returning to a retirement age of 65 the Company contend that this method will allow active members to have the possibility of a pension at the value of what they may have expected it to be at the retirement age of 60 if the scheme had not been met with harsh funding difficulties. The Company has explored all other options and believe this mechanism will best protect current members of the scheme and those with the least remaining time left in the Company.
3. The Company, although not in a position of provide additional funding for the scheme, has agreed to a package of measures in attempting to provide a manageable solution with the least effect on its employees.
RECOMMENDATION:
It is clear to the Court that on the basis of its current financial circumstances the continued maintenance of the Company’s defined benefit pension scheme is not a viable option. In these circumstances the Court can see no realistic alternative to the winding up of the scheme in the manner proposed by the Company. The Court recommends that the terms proposed by the Company upon which the wind-up would take place should be accepted subject to the modifications which follow: -
1 Once-off lump sum contribution
- Having regard to the anticipated diminution in the transfer value from the DB scheme as originally anticipated, the Company should increase its offer of an up-front lump sum by a further 5% (to 22.92% of transfer value) in the case of those over age 50 and by a further 2% (to 9.92% of transfer value) in the case of those under age 50.
2 Funding
- The funding proposals put forward by the Company in relation to the DC scheme, following the wind up of the DB scheme, should be adjusted so as to provide for a minimum funding rate of 10% by the employer and 5% by the employee. This arrangement should be confined to existing employees only.
3 Alternative proposals
- The Company should consider any alternative arrangements on the provision of pension benefits which may be proposed by the Union which are lawful and do not involve any additional cost to the Company.
4 Once-off voluntary redundancy
- In its submission to the Court the Company have put forward a proposal for a limited once-off redundancy package for those aged 56 and over on 30th June 2010. In the circumstances of this case the Court believes that this proposal has considerable merit and it ought to be further developed between the parties. In that regard the Court believes that a redundancy / early retirement package should be introduced as a once-off arrangement in conjunction with the close-down of the DB scheme. It should be available on a voluntary basis to those aged 54 and over on the date of this recommendation.
- The parties should have further discussions on the terms and conditions on which such a once-off scheme can be introduced up to but not beyond 31st July 2010. If final agreement is not reached by that date the matter should be referred back to the Court for final adjudication.
- For the purpose of expediting the matter the Court will issue its recommendation on the basis of supplemental written submissions and without the need for a further hearing.
5 Proposals on revised conditions of employment
- The Company have proposed a number of offsetting adjustments in conditions of employment as part of its final proposal. The Court recommends as follows in relation to each of these proposals: -
• New pay scales
- This proposal should be accepted in relation to new employees only.
• Pay freeze
- The Company’s proposal should be accepted.
• Pension contributions
- This proposal should be accepted in relation to new employees only.
• Cooperation with measures to improve efficiencies
- The Company’s proposal should be accepted.
• Sickness and accident benefits
- This proposal should be accepted in relation to new employees only. However the proposed benefit of 13 weeks at full pay and 13 weeks at half pay should apply to those with service between 26 weeks and 10 years. The nil benefit should apply up to 26 weeks service.
6 Other matters
- Subject to the terms of this Recommendation, and to the extent that they are not modified by those terms, the Company’s final proposals, as set out in its submission to the Court, should be accepted in full.
7 Finality of proposals
- No adjustments should be made to the contribution rates provided for by this recommendation in the event of the actual transfer value, in monetary terms, being more or less than the estimates used in the Mercer's calculations dated 1st December 2009.
- The terms of this Recommendation are intended to provide an industrial relations solution to the difficult issues giving rise to this referral. These terms are not intended to define or limit the individual legal rights of any party. However in the industrial relations context in which this Recommendation is issued its terms are intended to be in full and final settlement of all matters relating to the Maxol Limited Defined Benefit Pension Scheme and cannot be revisited on a collective or individual basis at any stage in the future.
Signed on behalf of the Labour Court
Kevin Duffy
July 1st 2010______________________
SCChairman
NOTE
Enquiries concerning this Recommendation should be addressed to Sharon Cahill, Court Secretary.