From the desk of the Pensions Inspector

By Pierre Lautischer

Monday,  December 12, 2005

As the Pensions Inspector for the National Pensions Office, Pierre Lautischer was instrumental in obtaining the first prosecution under the National Pension Law. He is a Certified Inspector General and Certified Fraud Examiner.

You may have noticed in the past few months, a number of news articles describing the National Pensions Office’s effort to gain compliance with the National Pensions Law (Revision 2000) from employers.

The Law has been in effect since 1998, only recently have we begun to actively pursue and prosecute non-compliant employers. By prosecuting those that choose not to comply, we hope to educate and motivate other employers into ensuring that they are in full compliance.

Our mission is to ensure the effective and efficient administration, implementation and evolution of the Law and Regulations. As the regulatory body of private pension plans in the Cayman Islands, we proactively meet service delivery standards and address evolving needs while balancing the interests of employees, other beneficiaries, legislators, employers and administrators. That being stated our first priority is to ensure that employers comply with the Law.

Currently, there are over 550 employers, which are not complying with the Law in one way or another. Our staff complement has grown from two in 2004 to five in 2005, with another Pensions Inspector coming aboard shortly.

Although we have had an increase in staff, we are still using over 70 percent of our resources in the fight for compliance. For this reason we have decided to fight smarter rather than harder and believe education of the public is the key. Some of the educational formats we are using include the legal system, brochures, news media and our new website.

This column is an example of one of those previously mentioned formats and this edition’s focus is on the employer and their numerous responsibilities. We have mentioned a few here but this is by no means an exhaustive list. First of all, the most basic responsibility is found in section four of the Law, which states that every employer shall provide a pension plan and contribute on behalf of every person employed by them with limited exceptions. Any employer in contravention of this section is subject to a fine of up to $10,000 on indictment.

At this point it is important to define who must participate. A participant is any employee or self-employed person between 18 and 60 years of age who is Caymanian, a permanent resident or a non-Caymanian with at least 9 months of continuous employment. The only exceptions to providing pension coverage apply to non-Caymanians who have not completed 9 months of continuous employment on the islands (not necessarily with the same employer) or those employed to do housework in private residences. The preceding are the minimum standards and exclusions, if the employer and employee agree then earlier participation may be implemented and/or exclusions can be waived.

Pension coverage is not optional; it is compulsory for both the employer and all eligible employees. Any side agreements, made between employers and employees, to not take deductions and not submit contributions are in contravention of the Law and illegal. At a minimum, an employer must contribute 5 percent of an employee’s earnings, up to the annual maximum pensionable earnings of $60,000. Self-employed persons must contribute a minimum of 10 percent of their pensionable earnings (a broad definition is placed on earnings of the self-employed) to a registered pension plan. The employee must contribute a maximum of 5 percent of their earnings up to the annual maximum pensionable earnings of $60,000.

The due date for both the employer and employee contributions is the 15th of the month immediately following the month to which the contributions pertain. For example, December contributions must be paid by January 15. Late payments are subject to interest calculated at 5 percent above the Cayman Islands prime and this rate is entrenched in the Law.

From time to time employers are requested to submit information to the National Pensions Office, within a specified time. Failure to provide this information, within the period specified, is subject to the laying of criminal charges against both the company and the individual. Contravention of this section is subject to a fine of up to $1000 for each occurrence.

Employers may register their own pension plan with the National Pensions Office or participate in any one of the Multi-Employer Pension Plans offering membership to Cayman’s employers and employees. In consultation with the employees, the employer selects the pension plan to be utilised. A list of the multi-employer pension plans can be found on the NPO’s website or by calling the National Pensions Office.

There are those employers that are reluctant to comply and believe if they ignore the Law that it will go away. The Law and the Office are here to stay and it is in everybody’s best interest to comply. Please feel free to contact the National Pensions Office at 945-8960 or check out our website at www.gov.ky/npo  which is scheduled for release in mid-December. For copies of our brochures please drop by our office which is located on the second floor of Anderson Square. We are here to help in any way that we can and to assist you on ensuring compliance with the law.

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