Ministerial Regulations (the Regulations) have introduced minimum contribution standards for pension schemes being used to exempt employees from enrolment in My Future Fund (MFF).
These minimum standards take effect from 1 January 2026. Accordingly, employers who were expecting their existing workplace pension to exempt employees from MFF will now need to assess the impact of the Regulations on the plans they had put in place for auto-enrolment (AE).
Background
Under the terms of the Automatic Enrolment Retirement Savings System Act 2024 (the Act), employees are exempt from MFF if employee and/or employer contributions are made via payroll to a “qualifying” pension scheme or “qualifying” PRSA. The Act empowered NAERSA (the regulatory body responsible for MFF) to draw up standards (in consultation with the Pensions Authority) for what is a “qualifying” scheme/PRSA.
Based on communications from the Department of Social Protection (DSP), the pensions industry expected the standards to be introduced several years from now. In the meantime, any level of contribution by an employee or employer via payroll to a pension/PRSA was expected to exempt employees from MFF. However, late last year, the DSP warned the industry that minimum standards were being actively considered by NAERSA (see our article here).
The Minimum Standards
The minimum standards introduced are set out in the table below:
| Defined Contribution Scheme / PRSA | |
|---|---|
| Minimum Employer Contributions | The lesser of: • 1.5% of employee's gross pay OR • €1,200 in any year |
| Combined Employer and Employee Contributions | The lesser of: • 3.5% of employee's gross pay* OR • €2,800 in any year *The 2% difference over the minimum employer contribution requirement may be paid by either the employer or the employee |
| Defined Benefit Scheme | |
|---|---|
| Scheme benefit | Continuous service in employment must entitle the employee to "accrue a long service benefit" |
For defined benefit schemes, it seems likely that the Regulations intend that the scheme must be open to future accrual for the scheme to meet the minimum standard. However, the Regulations are not entirely clear on this point.
A press release accompanying the Regulations indicates that NAERSA will be assessing contribution levels over a three-month period (calculating an average contribution level) to determine if the standards are met.
Implications for Employers
Many employers expected that their existing pension schemes/PRSAs would result in an exemption for some or all of their employees from AE. These employers will now need to assess if their scheme/PRSA offering meets these minimum standards. For example, if a scheme/PRSA provides for a matching contribution rate of 1% of basic salary, it may not meet the standards for employees contributing at the 1% rate (unless the monetary minimum amounts are reached).
For employers impacted by these minimum standards, they will need to decide whether to make up any shortfall solely through increased employer contributions or also seek to increase employee contributions. Increasing employee contribution levels for existing employees poses various legal challenges, and the related employment law implications must be carefully considered.
Those employers will also need to take advice on whether changes to the terms of their existing pension scheme may be required, such as changes to the contribution rules.
Helpfully, the Regulations have clarified that where contributions are overpaid to MFF, they can be refunded by NAERSA to both employees and employers. This should enable refunds in circumstances where there are overlapping contributions to both a workplace pension (that meets the minimum standards) and MFF. However, where a workplace pension does not meet the standards, there is nothing in the Regulations to prevent enrolment in MFF alongside a continuing obligation to contribute to the workplace pension. As such, there appears to be a potential risk of parallel pension contributions to both the MFF and an existing scheme arising for both the employer and the employee.
Next Steps
Employers who were expecting their employees to be exempted from AE will now need to assess if their scheme/PRSA offering meets these minimum standards, particularly where their scheme or PRSA provides for or allows low contribution rates. Where the scheme/PRSA is likely to fall short of the standards, changes will be required to contribution levels to qualify for the exemption from MFF. As these standards are now in force, time is of the essence for employers impacted by them.
Please contact Ian Devlin, Ciara McLoughlin, Jane McKeever, Jane Barrett, or your usual William Fry contact for further assistance in preparing for AE and managing its implications for your business.
