Two reports issued earlier this year by the Cayman Islands National Pensions Board allege certain companies are misappropriating funds which should be set aside for worker’s pensions.
The annual reports for the 2004-05 and 2005-06 fiscal years were made public in the Legislative Assembly last week.
‘There are individual employers owing sums of up to CI $840,000 in overdue pension contributions and in at least some cases, the deductions from employees’ salaries — have been misappropriated in various ways,’ the 2004-05 report read. ‘The magnitude of this growing problem to government cannot be overlooked any longer.’
The pensions board found that ‘only a small percentage’ of employers are openly flaunting their disregard of the pensions law, but that so far, most have done so with impunity.
‘The resources for oversight and enforcement still appear to be inadequate, as a result of which the board is unable to determine the extent of the problem or even whether those employers already owing hundreds of thousands of dollars are continuing to misappropriate further funds from the current earnings of employees,’ the 2004-05 report stated.
That 2004-05 pensions board report was completed in March 2007. Three months later a second report was released for the 2005-06 fiscal year, which ran from July 1, 2005 to June 30, 2006.
The latter report found additional staff had helped improve compliance and that there were many more successes in getting companies to adhere to the law.
However, the board also acknowledged that room for improvement still exists, particularly with some of the pension providers.
‘Some eight years after enactment of the (National Pensions) Law, there can no longer be any reasonable excuse for allowing employers to ignore it.’
According to the National Pensions Law (2000 Revision), every employer in the Cayman Islands is required to set up a pension plan for its workers and make contributions to that plan. Failure to do so can lead to fines of up to $10,000.
The law also specifies that all pension plans must be registered and certified by the superintendent of pensions.
The National Pensions Board 2005-06 report noted member’s concerns that there are still unregistered pension providers that have been allowed to accept employee contributions, which the National Pensions Office is unable to oversee due to a lack of records.
‘Two of the multi-employer plans were threatened to have their registrations revoked should they not prepare amendments to their plans and reports to meet the requirements of the law,’ the report stated.
The board report also added that a general lack of information prevented its oversight of the National Pensions Office operations in the area of legal compliance with registering pension plans.
‘The timeliness of the National Pensions Office’s response to both applications lodged and renewals overdue could often be open to criticism,’ the board report read. ‘This is one of the subjects which the board seeks to address in the review of the law.’
The pensions office stated in the board report that its efforts were being hampered by ‘inadequate management reporting systems.’
The National Pensions Board said a few cases where employers have been accused of violating the law are now coming before the court, but expressed its disappointment at the progress of these prosecutions.
‘Although the National Pensions Office and the Solicitor General’s Office are proceeding with the laying of charges, the progress through the courts appears to be excruciatingly slow,’ the board’s 2005-06 report stated.
‘There is still concern that when the public’s sense of moral outrage in respect of this situation inevitably surfaces, it will be directed at the government, the board, the National Pensions Office, and business community,’ the report read.
There are at least two cases where allegations of violating the National Pensions Law (2000 Revision) have been brought before the court. The highest-profile charges involved local businessman Scott Henderson, who was found guilty of failing to make contributions to a pension plan for employees and failure to provide information as requested by the superintendent of pensions.
During trial testimony, Mr. Henderson told the court that his company’s cash flow situation forced him to make decisions about where to apply funds. He said his first priority was to keep the company afloat so there eventually would be money to pay pensions.
Magistrate Margaret Ramsay-Hale, who presided over the case, said the situation with Mr. Henderson’s company evolved into robbing Peter to pay Paul. (See Caymanian Compass, 10 January)
The pensions board said it was convinced of the need for greater cooperation in moving these prosecutions through the legal system.