Labour Department says $13.7 million owed by 1,144 companies
Cayman Islands Complaints Commissioner Nicola Williams first reported in 2010 that 670 local businesses were delinquent in paying their employee pensions.
In the more than three years since, the problem has grown exponentially worse so that, as of June 30, a total of 1,144 business were listed as delinquent on payments into the private sector retirement system. Those businesses owed a total of $13.7 million to their current or former workers, according to Cayman Islands Labour and Pensions Department Director Mario Ebanks.
Mr. Ebanks said Wednesday that 167 businesses had been placed on payment plans following negotiations with his office and were due to pay up about $3.14 million into the various private sector retirement funds.
“It’s a significant amount, there’s no other way of saying it,” Mr. Ebanks said of the amount in arrears.
Commissioner Williams had another way of saying it: “This is a national crisis.”
“To say I was surprised that the problem has gotten worse is a massive understatement,” Ms Williams said Wednesday, revealing some information her office had obtained since its first own-motion investigation of the Cayman Islands private sector pension system.
“Working men and women … every month have funds deducted from their paychecks, thinking that these monies are being contributed to a pension plan which will help provide for themselves or their families in retirement,” Ms Williams said, “only to discover that it was used in some other way, or in some cases stolen from them, by dishonest employers.”
Ms Williams said her first report from 2010 had identified 21 recommendations the Office of the Complaints Commissioner issued in attempts to fix the problem from the government side of the equation. Ms Williams’s office does not have any mandate to take on employers or the pension plan funds directly. Only 10 of those 21 recommendations were “substantially complied with” by government and 11 other items were not.
“This level of delinquency affects thousands of people – Caymanian and non-Caymanian alike,” Ms Williams said, opining that she believed the majority of people who had been shorted pension contributions over the years by local businesses were Caymanians, Caymanian status-holders and permanent residents.
Mr. Ebanks said the latter cases Ms Williams referenced regarding the theft of pension funds were found to be very few of the entire delinquent number, but he admitted the scope of the problem – for an office that has four senior pension investigators – is daunting.
In the early part of this year, Mr. Ebanks said the Department of Labour and Pensions was able to “clear out” 562 of 1,108 cases in which employers were found to be at least 45 days behind in making good on their pension obligations. Some $1.3 million was collected in amounts paid back from those employers.
However, by June 30, that figure of delinquent companies had grown again to 1,144, despite the cases cleared earlier in the year by the labour and pensions office, with the companies involved owing nearly $14 million in past due pension payments.
In addition, Mr. Ebanks said his department was able to review 377 backlogged complaints regarding non-payment of pensions since the beginning of 2013. Those cases are now in “various stages of resolution,” he said, with some having been put before the courts, others being time barred for prosecution because they were more than five years old and still other cases where no offense occurred.
The Cayman Islands National Pensions Law requires all private sector employers to contribute toward a retirement plan for both Caymanian and non-Caymanian workers. The minimum contribution to those plans is a 5 percent payment taken from the employee’s salary and a matching 5 percent contribution from the local employer up to $60,000 annual salary. Employees can put in more toward their own retirement plans, if they wish.
Public sector pensions are governed under separate legislation known as the Public Service Pensions Law and did not fall under the scope of the complaints commissioner’s 2010 report.
A proposal was made by the previous United Democratic Party government under a revised National Pensions Bill that would have eliminated the requirement for non-Caymanian workers to contribute to a retirement plan, but that bill was never passed into law. The new Progressives-led government has promised to bring a revised plan for national pensions to the Legislative Assembly early in its term.
Until changes to the law are made official, Ms Williams said the rules are clear: “If you can’t run a business and pay your employees health care and pensions … then you can’t afford to run a business.”
Mr. Ebanks agreed with that statement and noted that government still lacks a “culture of compliance” when it comes to enforcing pension laws. He said agencies should cooperate more closely with one another to ensure that delinquent employers are not provided work permits or trade and business licenses from the government.
“These people were not pursued in the way that we’ve pursued them over the last nine months,” Mr. Ebanks said. “Once you’ve received a firm letter from a regulator … once they get this letter, they see it’s serious and they see we are going to prosecute … any reasonable and credible employers will respond.”
Ms Williams said the problem needs to be resolved by more action and not just sending a few sternly-worded letters.
“Many people about to retire will find that they have insufficient funds on which to live, and will have to rely on social services or other financial relief provided by the government, which are already stretched to the breaking point,” she said. “This is not only a problem for the Department of Labour and Pensions, but for the [Employment] Ministry and government as a whole.”