CMA Order: Three Ways to Avoid Starting 2021 With a Fine!

UK pension scheme trustees must submit their first compliance statement, along with a certificate, directly to the Competition and Markets Authority (CMA) by 7 January 2021.

The compliance statement relates to obligations under the CMA Order issued in June 2019, including setting strategic objectives for investment consultants, which followed the conclusion of the CMA’s investigation into the investment consultancy market. This is a new requirement, which needs to be submitted to a new regulator by a new deadline.

So far, so simple.

Continue Reading

All Change Please, all Change! The end of the Line for LIBOR

Fast train running in the city of LondonIt’s the end of the line for the London Interbank Offered Rate (LIBOR), the interest rate benchmark for many financial products since the 1980s. Sterling Overnight Index Average (SONIA), an alternative rate, will become the new benchmark of choice and pension schemes have been directed to step aboard pronto. What will the journey to SONIA look like and what stops will pension scheme trustees pass through on the way?

Where are we now?

LIBOR developed during the 1980s and originated from the need for a standard benchmark for interest rates across financial institutions. It is a measure of the average rate at which banks are willing to borrow wholesale unsecured funds and is calculated by using banks’ submissions of their inter-bank borrowing rates. Calculated on a daily basis and in five currencies, LIBOR is widely used as an interest rate benchmark and written in to an array of legal contracts and financial products. Continue Reading

IRS Guidance on the Payroll Tax Executive Order (US)

On August 8, 2020, President Trump issued an Executive Order titled “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” (the “Order”)[1]. The Order directs the Secretary of the Treasury to permit deferral of employee Old Age, Survivors and Disability Insurance (“OASDI”) taxes for payroll dates on and after September 1, 2020 through December 31, 2020.

The Order was the subject of a prior Blogpost on August 11, 2020.[2] That Post reviewed many legal and practical concerns associated with attempting to implement the Order. It also emphasized that the Secretary of Treasury was to issue guidance on how to implement the Order.

On August 28, 2020, the IRS issued Notice 2020-65 to provide long awaited guidance in relation to the Order. This Post summarizes the guidance in Notice 2020-65, and remaining legal and practical issues pertaining to the Order. Continue Reading

Don’t Delay, Process that Pension Transfer Today!

Uncover The FactsOur heading shows the stark warning to pension scheme administrators following the recent determination by The Pensions Ombudsman (TPO) in the complaint brought by Mr John Tenconi (Mr T) against the James Hay Partnership (James Hay). TPO upheld the complaint due to James Hay’s unreasonable delays and ordered that James Hay pay £43,700 (plus interest) into Mr T’s new pension plan. The case is unusual as it involved the court accepting (overruling TPO) Mr T’s argument that he would have invested his transfer value in a particular way. It is also one of the first instances of a pensions case turning on a defined contribution investor attempting to time the market to make an anticipated gain on the back of the Brexit referendum. Let us explain… Continue Reading

Executive Order Regarding Payroll Taxes (August 8, 2020)

On Saturday, August 8th, President Trump issued an executive order titled “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” (the “Order”)[1].  The Order provides for the deferral of certain payroll taxes.  The Order will be effective for wages paid on or after September 1, 2020 and will have to be implemented pursuant to Guidance issued by the Treasury Department.  Thus, this blogpost provides some initial information and thoughts about the Order.  We expect that more details will become available soon.

The Order directs the Secretary of the Treasury to use his authority under Section 7508A of the Internal Revenue Code to defer the withholding, deposit and payment of a portion of the Social Security taxes [2] that certain employees will owe with respect to wages paid during the period of September 1, 2020 through December 31, 2020.

Continue Reading

Now is the Climate for Change

Majestic-polar-bear-touching-sea-surface

As the Pension Schemes Bill (the Bill) continues to progress through parliament, it has been subject to many amendments, one of which would require pension schemes to take into account the government’s net zero targets on carbon emissions, as well as the Paris Agreement goals of limiting the rise of average global temperatures. As at the time of writing, the Bill has finished its passage in the House of Lords and is scheduled to receive its second reading in the House of Commons. For a recap of the Parliamentary process, see our earlier blog.

What are the amendments?

Amendments that will now be considered by the House of Commons include provisions for the government to make regulations that would impose new duties on trustees of occupational pension schemes with a view to securing that there is “effective governance of the scheme with respect to the effects of climate change”. This would involve trustees considering both the risks and opportunities presented by climate change. The provisions, which may be imposed by regulations, include a requirement to: Continue Reading

Supreme Court Ruling Limits Insurer and Employer Contraceptive Obligations (US)

Stacey GrundmanDoug Anderson and Meghna Rao recently published an article on the Supreme Court’s decision adopted under the Trump administration significantly cutting back the requirement that insurers and group health plans provide coverage for contraceptives without cost sharing under the Affordable Care Act (ACA) on our Employment Law Worldview blog. To read the full blog post online here.

 

Transfers of Personal Data Outside the EEA: Action Required for Pension Schemes

PadlockDoes your pensions administrator or any other service provider access your personal data from outside the EEA, such as in the US? If so, it is important to take action now to ensure continued compliance with your obligations as data controller. This could also apply to schemes with a sponsoring employer (or parent company) located outside the EEA in addition to schemes whose third party administrator hosts client personal data on servers situated outside the EEA.

As a reminder, the GDPR (General Data Protection Regulation) provides that pension trustees should only permit personal data to be transferred from the UK/EU to a recipient outside the European Economic Area (EEA) (either by the trustees directly or by a third party service provider) if there are appropriate safeguards in place, unless one of a limited number of derogations applies. The legal framework in the US is not considered to contain adequate protection for personal data and so additional measures have to be taken by trustees to protect personal data transferred to the US in addition to other non-EEA countries, except those who have been designated as having adequate data protection laws by the European Commission. For a US service provider those safeguards are typically either certification by the US company to the EU-US Privacy Shield Framework (Privacy Shield) or the Standard Contractual Clauses (SCCs), although some of the larger service providers may use Binding Corporate Rules (BCRs). Continue Reading

PPF to doff its compensation cap

On 22 June 2020, the High Court ruled in Hughes v Board of the Pension Protection Fund that certain restrictions applied to benefits paid from the Pension Protection Fund (PPF) are unlawful on age discrimination grounds. Continue Reading

COVID-19: Yet More Relief, and More Certainty, for EMI Option Holders

On Tuesday, 21 July 2020, the Government announced further good news for companies operating enterprise management incentive (EMI) share option schemes that will allow them to continue to grant new options to individuals who:

  • have been furloughed under the Coronavirus Job Retention Scheme (CJRS), or
  • have taken unpaid leave, or
  • have had their working hours reduced

as a result of COVID-19.

EMI option holders are normally required to commit at least 25 hours a week (or, if less, 75% of their total working time) to the employer company. That can either be difficult or impossible where someone has been furloughed or had their hours reduced. The COVID-19 relaxation covers new options granted between 19 March 2020 and 5 April 2021 and will be welcomed by employers who want to grant options to staff who have been affected by the pandemic.

The period can be extended to 5 April 2022 should this be considered necessary or expedient “if the COVID-19 pandemic has not ended by April 2021” (which suggests it may not all be over by Christmas).

This new concession builds on the previous announcement that “if an employee with share options granted before [19 March 2020] would otherwise have met the scheme requirements but did not do so for reasons connected to the coronavirus pandemic, the time which they would have spent on the business of the company will count towards their working time” (see our previous blog post). That was a time-limited exception for existing participants in EMI schemes to ensure they did not need to exercise options earlier than planned.

One word urging continuing caution – there is still no clarity on the necessity for this (extended) concession to be approved by the European Commission for State aid purposes. Considering similar incentives have been adopted across Europe as part of the fiscal response to the pandemic it seems unlikely to be a problem… but affected employees and employers should watch this space for further developments.

LexBlog