Although the effective deadline to meet eligibility requirements to receive a pension “refund” payment for Cayman Islands private sector employees is Dec. 31, 2017, it is likely that in many instances, the worker seeking that refund will have to leave their employment by Nov. 30 to obtain those funds.
According to the revamped National Pensions Law, which governs private sector pensions in Cayman, the territory’s six multi-member retirement fund administrators will cease issuing cash refunds from pension plans at a specified date, although they will still allow transfers of funds in those plans to analogous retirement savings accounts in other countries. The rules also apply to single-client pension plans.
Public employee pensions, governed under Cayman’s Public Service Pensions Law, are not affected by the rules for private sector retirement funds.
The practical process for obtaining pension refunds does not seem to be well understood by many workers now leaving or considering leaving the islands to obtain their pension monies, HSM law firm managing partner Huw Moses said Friday following communications from firm clients who noted they were receiving conflicting information.
“We believe there’s a high level of confusion among people applying for these pension refunds,” Mr. Moses said. “It appears the law is being interpreted differently by different providers.”
The Department of Labour and Pensions issued written advice to all private sector pension plan providers on Oct. 26, 2017, which has been obtained by the Cayman Compass, regarding the issuance of pension refunds.
The advice states that for any private sector workers to receive a refund they must meet three criteria: They must end their employment with the Cayman company, show they have made no contributions to their retirement savings account for at least two years before the deadline date to apply for a refund – which is Dec. 31, 2019 – and they must have left the Cayman Islands for at least six months before the application.
In order for the two-year requirement for ending pension contributions to be met, the person’s employer would have to pay all remaining outstanding contributions before Dec. 31, 2017. If the individual keeps working until Dec. 31, that deadline would not be met, unless special arrangements were made beforehand with the employer.
According to the written advice from the department: “With respect to contributions, November 2017 … is the last contribution period for which pension contributions can be received by pension plan administrators. As a result, employees can work until Nov. 30, 2017 and fulfil the three requirements. For the avoidance of doubt: employees can work into December  as long as the employer is willing to pay their pension contributions on or before Dec. 28, 2017, which will facilitate the receipt and processing of the payment by [the pension administrators] before Dec. 31, 2017 deadline.”
The advice further states that employees should not be penalized if their employer has been late with payments of monthly contributions.
Once workers who are departing the islands have met all three criteria, there is additional confusion regarding when they should formally apply to receive that refund, Mr. Moses said.
He said HSM is aware of clients who were advised by some plan providers that they could not apply for the refunds now, and could not do so if they returned to the islands on vacation, because they would still be “resident in the islands,” even if they entered Cayman on a visitor’s permit. Another provider said the individuals seeking a refund had to apply by Dec. 31, 2017 – not Dec. 31, 2019.
The Department of Labour and Pensions advice also sought to clarify issues regarding when workers should apply to receive a refund: “Once the member has fulfilled all of the criteria, the member has until Dec. 31, 2019 to submit their application. Dec. 31, 2019 is the deadline to apply for the refund, recognizing that it will take time for the applications to be processed by [the plan administrators]. For clarity: applications should not be accepted after Dec. 31, 2019. Any applications that are received, where the member does not fulfil the three criteria by Dec. 31, 2019, should be denied.”
Mr. Moses said, in the case of an employee whose last pension contribution was submitted on Dec. 23, 2017, they would not qualify for a refund until Dec. 23, 2019 – two years after their employer stopped making pension contributions. This would give that worker between Dec. 23, 2019 and Dec. 31, 2019 – during the holiday season – to apply for the refund.
Silver Thatch Pensions representatives said, in practice, their administrators typically allow pension plan participants to apply for refunds “a few months before” their eligibility comes up. So, in the case of departing workers, a refund application received in October or November 2019 would be accepted.
The Chamber Pension Plan indicated the Department of Labour and Pensions had been abundantly clear about the Dec. 31, 2019 application deadline, but noted it had some concerns about individuals who left the islands some time ago and had not claimed their refunds yet, since those individuals might not even realize the refund application deadline exists.
“Perhaps the government can clarify all this, so we can all have a happy Christmas in two years’ time,” Mr. Moses said.