Q&A-Company has defaulted on its contributions, so how are the debts to workers treated?

I worked for a company for 15 years during which time I contributed 5% of my salary to a pension plan and was told the company contributed 5%.  The company has now closed and a liquidator brought in. Now we are told that we are to be paid only the amount that we, the workers, contributed, and that the company had defaulted on its contribution amount for sometime now. I’m not sure where debt to workers falls in terms of prioritising payments to creditors of a failed company. Can you explain this, and tell me if there is there anything we can do to ensure that we get even some of the money we feel we are entitled to?

 Ans:Firstly, if you worked for a company for 15 years and you were a member of the company’s Superannuation Fund i.e. pension plan for the entire period, you do have some benefit rights even though the company has now closed its door to doing business.  Based on the information provided in your question, the first place you should start is to request a copy of the Fund’s Trust Deed and Rules (TD&R).  The Deed will state the names of the trustees and it is those persons who you and the other Plan Members should approach to ask questions and have them answered.  The Deed will also help you and the Members to identify if there were any breaches that were committed by the Trustees and what is the recourse.  This information provides all the Members with the opportunity to discuss the matter in a coherent manner with the Trustees and hence resolve the matter in an equitable manner for all the beneficiaries of the Fund.  Next, you can look at the Rules to determine what your benefits are and what happens if there is a wind-up of the Employer.  Remember, the TD&R are the legal documents of the Fund and if there are any legal proceedings, this is the document that will be used by the courts as a guide.  While this response to your question can provide general comments, it is the TD&R that can give you the specifics on your Fund.

            If there were incomplete records of contributions deducted from your salary, it would be useful to gather up all your pay slips so that you can determine whether you are being paid the correct benefits from the Fund.  Along with the payslips you should have also received Annual Member Statements, which are usually prepared by the Administrator of the Fund.  These documents (pay slips and Annual Member Statements) are very useful at this time for checking your benefits.

            When an Employer-sponsored Superannuation Fund is established, the TD&R provides for the assets of the fund to be legally owned by the trustees.  Hence, it is not your former employer who is answerable for your benefits but the trustees. Any contributions owed to the fund are usually part of the group of creditors who get priority because they are a contractual obligation between the Employer and the trustees.  Therefore, where contributions are due and payable, it is now for the Trustees to resolve this matter with the liquidator who has taken over the company from the owners or Board of Directors.

            It appears that, if you and the plan members are unable to obtain information from the trustees, there may be the need to exercise your rights under the Pensions Act 2004 section 38 which provides for recourse to the Commission i.e. Financial Services Commission (FSC).  In addition, it may be useful to purchase a copy of the Pensions (Superannuation Funds and Retirement Schemes) Act 2004 and the enabling Regulations (2006) or check http://www.moj.gov.jm/laws.  These are very useful as a guide for asking appropriate questions and seeking answers. 

            It would be hardly unlikely that none of the contributions made to the Fund will be available for distribution to the Members.  But again this matter is best answered by the Trustees since they must be aware of the status of the assets and the amount available for distribution to the members. The Rules of all Superannuation Funds address the matter of when a fund is being wound-up or closed down and even if there are no Trustees willing to act, the courts will appoint a trustee to act on behalf of the Members: the equitable nature of trusts dictate that equity will not allow the Fund to fail in its responsibility to distribute the assets due to there being no trustee to act.  Hence, the court will appoint a trustee if required.

            There are many signs which Members of a Superannuation Fund can use as an indication that all is not well with a Fund.  However, most employees usually choose to ignore the signs than to ask questions and the trustees are usually afraid to give answers as this may result in loss of one’s valuable source of income: the current job.  It is expected that this experience will not go unnoticed, as I am sure there are many lessons to be learned.  The primary lesson is that each Employee of an Approved Superannuation Fund needs to take an active role in understanding their Superannuation Fund benefits and responsibilities and that at least annual members meetings should be convened to discuss any issues as they may arise.  As in this case, probably if the trustees and the plan members were meeting regularly, they could have assisted the Employer by encouraging the wind-up of the fund in an orderly manner.  Thus mitigating against your question, which is now being asked, and which is also contributing to a feeling that all your 15 years of contributions have been lost!  We must always bear in mind that no one is perfect and that help will always be required of someone else.

             It is highly recommended that all the Plan Members request a meeting with the Trustees to determine the current status of the Fund and the way forward.  However, the Members should be prepared to participate in the meeting in an orderly and respectful manner with the trustees.  However, the first responsibility for each Plan Member prior to the meeting is to obtain copies of the Plan documents and use these documents as the basis for asking questions and charting the way forward.

Disclaimer: The information stated above to answer your question is not a guarantee that you will achieve your desired retirement financial and lifestyle goals.  More information is required to provide a more robust response to your personal and family situation.  Readers who are seeking a comprehensive retirement financial and lifestyle advice should do so from a Financial Services Commission (FSC) licensed and qualified advisor who specialises in retirement financial and lifestyle planning