The High Court recently gave a judgment in a case concerning an employer contribution demand made by the trustees of the Omega Pharma Ireland Pension and Death Benefits Scheme, a defined benefit scheme, and the basis for calculating the amount claimed by the trustees.

The employer gave the trustees three months’ notice to terminate its liability to contribute to the scheme as required under the trust deed and rules.  The scheme met the statutory minimum funding standard (MFS).  The trust deed provided for employer contributions to be determined by the trustees, after consulting the scheme actuary and the principal employer, as were necessary to support and maintain the fund in order to provide the benefits under the scheme.  The trustees consulted with the scheme actuary who recommended an employer contribution based on a hybrid MFS/annuity buy-out basis and this was adopted by the trustees.  The employer declined to engage in any form of consultation with the trustees subsequent to the issue of its termination notice.  The trustees then sued the employers for €2.23 million (the amount ultimately sought by the trustees calculated on the hybrid basis).  

In his judgment, Mr Justice Moriarty of the High Court upheld the trustees’ claim against the employers in full.  In his conclusions, the judge approved and followed the standard of review for trustees’ decisions as set out in the Element Six case earlier this year, i.e. that a Court will only overrule a decision of trustees if no other reasonable body of trustees would have made such a decision. The trustees in this case were found to have acted in good faith pursuant to the best interests of the scheme’s members in making a reasonable demand in the absence of engagement from the employer.

This judgment is important as it underlines and reinforces some of the core legal principles to be followed by pension scheme trustees.  It also gives further judicial guidance on contribution demands and other relevant issues that arise in practice from time to time. Trustees, employers and advisers can learn from the lessons in the case when making decisions – particularly when making difficult, and possibly controversial, decisions such as whether or not to make a contribution demand.  

A more detailed discussion of the judgment’s implications is available here.

Contributed by Michael Wolfe.