Summary of the National Pension Scheme (occupational Pensions) Act, 1999

Effective Date

The effective date of the Act is 1st January, 2000. All Employers must comply with the Act from 1st January, 2000.

Type of Pension Plan

The pension plan effected by the employer may be either a defined benefit or a defined contribution plan.

Eligibility for Membership

Every employee who has attained age 23 and worked a minimum of 720 hours per calendar year must be covered. A person employed by more than one employer must be covered under each plan if he meets the criteria for coverage with each employer. Coverage is mandatory for Bermudians and spouses of Bermudians. Coverage is optional for non-Bermudian contract workers.

See Also: Self-Employed Retirement Plan

Definitions of "employee" and "employer"

"Employee" means a Bermudian or spouse of a Bermudian who is employed in Bermuda by an employer.

"Employer" means a person in Bermuda who employs employees, and includes a self-employed person.

Contributions

Minimum contribution rates are based on "pensionable earnings" per year. Although the employer may elect to pay all of the required contribution, the following table gives a likely breakdown.

These contributions are in addition to the contributions made to the current Contributory Pension Fund.

Pensionable Earnings

"Pensionable earnings" means -in the case of an employee, any of the following payments expressed in monetary terms and paid (directly or indirectly) to the employee by the employer up to a MAXIMUM of $200,000 per year -

(i) any wages, salary or leave pay;
(ii) any fee or commission;
(iii) any bonus, including payments from a profit-sharing scheme, which exceeds ten per cent of the employee's basic salary or wage for the period in question;

but does not include overtime payments in respect of hours worked in excess of 35 hours in any week, severance payments, retirement or long-service recognition payments or health insurance payments.

Vesting and Locking-in

Benefits are required to become vested in the employee no later than the completion of two years of membership in the plan. However, if an employee is a member of a pension plan which is in existence at 31st December, 1999, the member shall be fully vested on the date determined in accordance with the provisions of the plan, or by 1st January, 2002 whichever is earlier.

Benefits earned after the effective date of the Act are locked-in and cannot be received as a cash refund.

The Act does not prohibit the refund of any contributions and interest made to a pension plan prior to the Act's effective date.

Retirement Date and Benefits

The normal retirement date occurs at age 65, although early retirement is allowed as soon as age 55 years. Retirement can be deferred beyond age 65 and the member may elect to continue making contributions and accrue benefits up to his actual retirement date.

The plan must provide for the accrual of pension benefits in a gradual and uniform manner and cannot be variable at the discretion of the employer.

Pensions are payable for the member's lifetime.

Plan Amendments

A plan cannot make an amendment which seeks to reduce accrued benefits.
All plan amendments must be registered with the Commission within 90 days of the effective date of the amendment. The Commission has the power to refuse to register an amendment that does not comply with the Act.

Member Statements

Members must receive a statement of benefits at least annually and at termination of employment.

Portability

A member who terminates employment shall be entitled to transfer his locked-in benefits to another approved pension plan, to a Prescribed Retirement Product or to receive a paid-up pension benefit.

Beneficiary

"Beneficiary" means the person who has been appointed in writing by the member as his beneficiary for the purposes of the pension plan.

A member of the pension plan is entitled to name a beneficiary of his choice and will not be required to name his spouse, unless this is his preference.

Death Benefits

If a member dies before retirement his beneficiary receives a cash refund of the employee's contributions plus interest, plus any vested Employer contributions plus interest.

Registration and Filing Requirements

Policy documents are required to be registered with the Pension Commission for approval within 180 days after the establishment of a new plan. Plans in existence before the Act comes into operation are required to register the plan within one year after the Act comes into operation.

Plan administrators must submit annual information reports to the Commission. Triennial actuarial valuation reports will be required for defined benefit plans.

Plan Assets

All assets in the plan must be held separately from the assets of the employer.

DISCLAIMER:
The information contained in this Pension Summary is for general informational purposes only. It should not be used as a substitute for consulting "The National Pension Scheme (Occupational Pensions) Act, 1999, and as Amended.