Approved pension fund administrators have been asked to strictly comply with the National Pensions Law with regard to charging interest on employer payments made late.
A press release sent out by the Ministry of Employment last week stated that there had been dialogue between the National Pensions Office and employers on the subject of late payments.
‘One important outcome of this dialogue has been the need to remind employers that Pensions Regulations require them to submit all contributions to the chosen fund by the 15th day of the month immediately following the month in which they fell due,’ the press release stated. ‘That means that April’s payments must be received by the 15th May.
‘In law, late payments are subject to interest charges of prime rate plus five per cent, so it is also useful for employers to understand that their fund administrators do not hold any authority to permit these deadlines to slide or waive interest charges due.’
Superintendent of Pensions Cyril Theriault said fund administrators had been reminded of their strict obligations to enforce the rules.
‘Funds must actually be with the plan by the cut-off date,’ he said. ‘Cheques submitted on time but stating a due date for payment beyond the 15th are not in compliance with the law and will incur interest charges for the employer.’
In an interview with the Caymanian Compass, Mr. Theriault said some of the pension fund administrators do not make their investments until the later in the month, so enforcement of the deadline has not been rigid.
‘But the law requires the money be in by the 15th,’ Mr. Theriault said, adding that funds could be earning interest locally in the meantime.
In the press release issued last week, Chairman of the National Pensions Board Bryan Bothwell also reminded employers that the regular payment of pensions contributions was a mandatory condition of employment in the Cayman Islands.
‘We want to ensure that employers and employees fully understand that paying pension contributions is not a voluntary measure they can opt out of or choose not to do.’
The Pensions Law requires contributions of not less than 10 per cent of an employee’s earnings, which comprises a minimum contribution from the employer of five per cent and a maximum contribution from the employee of five per cent.
Mr. Bothwell said some employers were not paying the required pension payments to the fund administrators within the time provided for by law, even if they had made deductions from employee’s earnings.
‘The interest fees charged to employers for late payment go towards compensating employees for any loss of investment earnings on their contributions, due which have not reached the fund.
‘It is critical then that administrators and employers work together to ensure that contributions are received on time and that interest charges are properly collected,’ Mr. Bothwell said. ‘Employees… can also help protect themselves by cross-checking pension plan statements with payslips to ensure that their earnings have been properly deducted and the correct contributions made to their fund.’
Mr. Theriault said there are currently a number of companies in arrears with their pension payments and the National Pensions Office as making stringent efforts to ensure employees get all the monies due to them.
Speaking to the Caymanian Compass last week, Mr. Theriault said the NPO had three inspectors on staff and he was not asking for more.
‘What I am lobbying for is a change in the law,’ he said.
In particular, Mr. Theriault would like to see an increased level of fines for non-compliance of the law and the ability of the NPO to levy the fines directly without going through the courts.
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