You may well have heard the recent radio campaign advising Employers that if you do not find the time to put a pension scheme in place for your Employees that you are breaking the law. The Ad in itself is pretty alarming but it it true, as an Employer (even if you are a small business owner with no more than one employee!) you have a legal obligation to make a PRSA available to your employee/(s).
So what is a PRSA? A PRSA is a Personal Retirement Savings Account. It is a long term pension investment plan and allows employees to create a pension fund for themselves in preparation for their retirement. PRSA’s are flexible insofar as employees can switch from one PRSA to another at any time free of charge.
So what exactly are your obligations as an Employer? Sections 121 and 123 of the Pensions Acts, 1990 – 2002 places this obligation on employers to make Personal Retirement Savings Account (PRSAs) available to some of their employees. These employees, termed excluded employees, are any employees that are not members of a pension scheme or who need to wait longer than 6 months from the date of commencing employment to be admitted as members of the scheme. Therefore if you not operate a pension scheme, all of your employees are deemed to be excluded employees.
As an employer
You will have to offer the facility to your employees to take out at least one standard PRSA if:
- you do not currently have a pension scheme in place; or
- you have employees that are not included in the pension scheme; or
- you have imposed a waiting period for membership of the pension scheme of more than 6 months; or
- you do not allow employees take out an AVC Plan (within the scheme rules).
- If you currently have a pension scheme where all your employees are entitled to membership, you may not be affected by the legislation.
To establish a PRSA pension plan, you are obliged to:
- nominate a company (or companies) to provide access to at least one standard PRSA for your staff. This company must be a PRSA provider approved by the Pensions Board.
- communicate this choice to your staff and inform them about the PRSA facility you have decided on.
- allow your employees access to this provider, either by giving the provider (or an intermediary) permission to talk to your staff or by allowing your staff time to talk to that provider (or an intermediary).
- write to your employees offering the option to deduct regular PRSA payments directly from their pay. If your employees choose this method of payment, income tax relief will be immediate.
- ensure that the PRSA contract is approved under Part 10 of the Pensions Act 1990.
- You do not need to contribute, but it is extremely tax efficient if you decide to do so.
While the PRSA is in force you are obliged to:
- send any payments deducted from the employees’ salaries to the PRSA provider within 21 days from the end of the month in which they were deducted. The employee may opt to pay personal contributions from his own bank account in which case this requirement does not apply.
- send any payments you make yourself to the provider within the same timeframe outlined above.
notify the provider and employee in writing, at least once a month, of the payments deducted from employees’ salaries and any payments made by you. This relates to those contributions paid between the last such statement and this one.
As an employer:
- you do not have to contribute to a PRSA.
- you do not have any responsibility regarding the investment choice and performance of the PRSA fund(s).
If you do have a pension scheme already:
If on leaving service one of your employees wishes to transfer from this to a PRSA you must give them certain information about the trust scheme and the new PRSA facility.
As a Financial broker we can assist you in fulfilling this important obligation. We can set up a contractual arrangement with a life company which enables employees to avail of a PRSA, if they so wish. You will be furnished with a Certificate which is evidence that you have fulfilled your obligation in this regard. We can furnish you with a specific letter advising your employers of their rights in this regard, together with a form on which they can indicate whether they wish to speak to a Financial Advisor in relation to the option of effecting a PRSA Plan. We can meet with your employee/(s) as a team and individually as required.
If you are concerned that you are not fulfilling your obligations please contact us.
This is an opinion only and does not constitute advice as individual circumstances will determine all financial advise given.