Employer Pension Obligations
What are my obligations as an employer?
Personal Retirement savings Accounts [PRSA] were introduced through the Pensions (Amendment) Act, 2002. A PRSA is a long-term personal retirement account designed to enable you to save for retirement in a flexible manner. Since 2003 employers that do not provide an occupational pension scheme for their employees are obliged to provide access to at least one Standard PRSA. Employers are required to have provided access to a PRSA to employees who are not entitled to join a pension scheme within 6 months of existing service.
As an employer, you must offer your employees the facility to take out at least one standard PRSA if:
- You do not currently have a pension scheme in place; or
- You have employees that are not included in the pension scheme; or
- You have imposed a waiting period for membership of the pension scheme of more than 6 months; or
- You do not allow employees take out an AVC plan (within the scheme rules).
- If you currently have a pension scheme where all your employees are entitled to membership, you may not be affected by the legislation.
To establish a PRSA pension plan, you are obliged to:
- Nominate a company (or companies) to provide access to at least one standard PRSA for your staff. This company must be a PRSA provider approved by the Pensions Board.
- Communicate this choice to your staff and inform them about the PRSA facility you have decided on.
- Allow your employees access to this provider, either by giving the provider (or an intermediary) permission to talk to your staff or by allowing your staff time to talk to that provider (or an intermediary).
- Write to your employees offering the option to deduct regular PRSA payments directly from their pay. If your employees choose this method of payment, PAYE and PRSI relief will be immediate.
- Ensure that the PRSA contract is approved under Part 10 of the Pensions Act 1990.
- You do not need to contribute, but it is extremely tax efficient if you decide to do so.
While the PRSA is in force you are obliged to:
- Send any payments deducted from the employees’ salaries to the PRSA provider within 21 days from the end of the month in which they were deducted. The employee may opt to pay personal contributions from his own bank account in which case this requirement does not apply.
- Send any payments you make yourself to the provider within the same timeframe outlined above.
- Notify the provider and employee in writing, at least once a month, of the payments deducted from employees’ salaries and any payments made by you. This relates to those contributions paid between the last such statement and this one.
As an employer:
- You do not have to contribute to a PRSA
- You do not have to act as a Trustee of the PRSA Scheme
- You do not have any responsibility regarding the investment choice and performance of the PRSA fund(s).
If you have a pension scheme already:
- If on leaving service, one of your employee’s wishes to transfer from this scheme to a PRSA you must give them certain information about the trust scheme and the new PRSA facility. Your financial adviser will help you with this.
What are the consequences of non-compliance?
Employers may be subject to an on-the-spot fine if:
(a) They fail to respond to a request by The Pensions Board to furnish information about their provision of access to a Standard PRSA for ‘excluded employees’ and
(b) An employer does not provide at least a monthly statement to employees showing contributions deducted and employer contributions paid in the previous month.
Adelphi Financial Brokers will advise employers on the setting up of a PRSA scheme; ensuring that all qualifying employees receive the statutory information and advice to ensure full compliance with the law and assistance with the on-going operation of the scheme.