Firm halted in bid to close pension scheme

A COMPANY hoping to be one of the first in the State to close a defined-benefit pension scheme for all existing workers has been told by the Labour Court it must enter talks to retain the scheme.

Vita Cortex wanted to close the scheme for 40 workers and move all existing staff into a new defined-contribution system.

The norm in Ireland to date has been that a company wishing to transfer to the defined-contribution scheme would maintain the right of existing staff to remain on the defined-benefit version. However, in Britain there have been a number of cases where the complete transfer has occurred.

Vita Cortex announced it was ending contributions to the defined-benefit scheme in June 2006 and the cessation was due to take effect from the end of December 2006. It argued there were clear financial reasons behind the move.

However, SIPTU threatened to ballot for industrial action if the change was introduced unilaterally and the move was postponed to allow for a resolution to be sought.

According to the Labour Court, the union argued that the company had shown no willingness to engage with its employees in any meaningful way to protect many of its long-service employees in maintaining the existing pension scheme.

It said Vita Cortex had displayed “utter contempt” for its employees by attempting to pass on any increased costs as the only means of saving the scheme.

The company argued that the trend in its operating losses made it inoperable for management to continue to incur increased costs that are unsustainable.

Vita Cortex said that involved dealing with the realities of declining numbers, increasing age profile and the risk that factors outside its control could lead to a problem of a significantly depleted pension provision at the time of retirement if the company did not make difficult decisions. It also said it was concerned over its ability to meet further significant cost increases in the future and meet its legal obligations under the defined-benefit plan.

The Labour Court said it was conscious of the company’s difficult commercial position.

“The court feels, however, that given the high level of social welfare integration in the scheme coupled with the funding history of the scheme and the relatively low level of contributions from both sides having regard to such schemes generally and particularly at the present time, that the problem is not insurmountable with appropriate levels of effort and goodwill from both parties.

“The court accordingly, recommends that the parties should immediately re-engage with the object of jointly addressing the means necessary to retain the defined-benefit scheme in operation. The assistance of the LRC may be sought if necessary,” it said.

Meanwhile, the Pensions Board has prosecuted a Co Wicklow businessman for failing to comply with pension board requests for information in relation to his PRSA obligations as an employer.

Kevin Mulvey, of Enniskerry, Co Wicklow, was requested to give the board the names of all occupational pensions schemes established for the benefit of his employees, the criteria for membership of each such scheme, and/or a copy of the contract entered into by him with a PRSA provider. Mr Mulvey was also fined €500.