SWI - PRSA Inspector's Guidelines


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Table of Contents

1. BACKGROUND - WHAT IS A PRSA

2. THE PENSIONS BOARD

3. OBLIGATIONS OF EMPLOYERS/EMPLOYEES

4. ROLE OF SOCIAL WELFARE INSPECTORS IN RELATION TO PRSA

5. POWERS OF SOCIAL WELFARE INSPECTORS

6. ACTION TO BE TAKEN

Appendix 1 - AGREED PRSA PROVIDERS

Appendix 2 - DEFINITIONS


These Guidelines should be read in conjunction with the PRSI GUIDELINES 2003

1. BACKGROUND

1.1 The Government is committed to raising the level of private pension coverage from 50% to 70%. Currently less than half the population have made any financial provision for their retirement.

1.2 The State will provide people in retirement with some income for the future, but it is largely down to individuals to provide for themselves. Personal Retirement Savings Accounts (PRSAs) are one of the main instruments employed to achieve this objective.

1.3 WHAT IS A PRSA?
A PRSA is a low cost, flexible pension plan taken out with an authorised PRSA provider designed particularly for those who are not members of an occupational pension scheme.

It is a portable pension that can be carried from job to job or transferred to another PRSA provider.

An Occupational Pension Scheme is:

A pension scheme set up by an employer to provide retirement benefits for employees. Also known as "Company Pension Scheme".

1.4 WHO CAN TAKE OUT A PRSA?
PRSAs are available to anyone regardless of their job or employment status. Therefore, anyone can get a PRSA including a part-time or casual employee, a highly paid professional, self-employed, a homemaker, a carer, a contractor, an employer, an employee, a partner in a partnership, or unemployed.

Individuals may continue to contribute to a PRSA after retirement as long as they are not aged 75 and over.

1.5 STATEMENT OF ACCOUNT
PRSA holders will receive a Statement of Account every 6 months outlining contributions paid into PRSA and the transfer value of the PRSA at date of statement.

1.6 PRSAs are pension investment accounts and not savings accounts.

1.7 PRSAs normally cannot be cashed in before reaching 60 years of age (or retirement).

2. THE PENSIONS BOARD

2.1 The Pensions Board was established by the Minister for Social Protection under the terms of the Pensions Act 1990.

Its main functions as set out in that Act and amended legislation, most recently in the Pensions (Amendment) Act, 2002, are:

  • to monitor and supervise the operation of the Pensions Act and pensions developments generally, including the activities of PRSA (Personal Retirement Savings Account) providers, the provision of PRSA products and the operation of PRSAs;
  • to issue guidelines or Guidance Notes on the duties and responsibilities of trustees of schemes and Codes of Practice on specific aspects of their responsibilities
  • to issue guidelines or Guidance Notes on the duties and responsibilities of PRSA providers in relation to PRSA products;
  • to encourage the provision of appropriate training for trustees of schemes, and to advise the Minister on standards for trustees;
  • to advise the Minister on all matters in relation to the Pensions Act and on pension matters generally

2.2 All PRSA products must be jointly approved by the Pensions Board and the Revenue Commissioners.

All PRSAs have to meet the standards laid down by the Pensions (Amendment) Act 2002. These standards are monitored by the Pensions Board with the consumers' interests in mind. PRSAs are intended to be simple to understand and adaptable to changing circumstances.

2.3 Occupational Pension schemes must register with the Board, and most schemes must pay an annual fee to meet the Board's administrative costs. The Board can act on behalf of pension scheme members who are concerned about their scheme; it can investigate the operation of pension schemes; it has the power to prosecute for breaches of the Pensions Act and to take court action against trustees for the protection of members and their rights.

2.4 PENSIONS ACT LEGISLATION
Pensions Act 1990 as amended by Pensions (Amendment) Act 2002 provided the legislative framework necessary for the introduction of PRSAs.

The Pensions (Amendment) Act 2002 provided for the introduction of Personal Retirement Savings Accounts (PRSAs).

Section 121(1)(a) of the Pensions Act, 1990

"121. (1) An employer who is not operating a scheme or who is operating a scheme which limits eligibility for membership of it or imposes a waiting period for membership of it which is greater than 6 months from the date of commencement of employment shall, in respect of at least one type of Standard PRSA -

a) enter for the benefit of his excluded employees into a contractual arrangement with one or more PRSA providers to enable those employees to participate in such a PRSA,"

2.5 SOCIAL WELFARE (CONSOLIDATION) ACT 2005
Section 250(3)(b) of the Social Welfare (Consolidation) Act 2005 enables inspectors to verify that employers have entered into a contract with a PRSA provider so that access to at least one standard PRSA will be available for all 'excluded employees'.

Since 15th September 2003, employers have an obligation to provide access to at least one Standard PRSA by entering into a contractual agreement with one or more authorised PRSA provider where they do not operate an occupational pension scheme which covers all staff within six months of having commenced employment for retirement benefits.

If the scheme does not cover all employees in this manner the employer should be regarded as employing 'excluded employees'.

2.6 Employers who do not operate an occupational pension scheme, or, where there are certain restrictions applying to their occupational pension scheme, are obliged to ensure that their employees have access to at least one Standard PRSA.

3. OBLIGATIONS OF EMPLOYERS/EMPLOYEES

3.1 All employers have been required since 15th September 2003 to enter a contract with a PRSA provider so that access to at least one Standard PRSA will be available for all excluded employees by that date

3.2 All Employers with 'excluded employees' have to provide access to PRSAs regardless of:

  • legal entity (sole trader, partnership, limited company etc.)
  • size of workforce (even one part-time employee)
  • employment status of workforce (seasonal, contract, part-time)

Note: In the UK where an employer has less than 5 employees they are exempt from this obligation. This does not apply in Ireland.

3.3 Employers are legally obliged to:

  • enter into a contract with a PRSA provider
  • notify 'excluded employees' that they have a right to contribute to a standard PRSA
  • allow the PRSA provider or intermediary reasonable access to 'excluded employees' at their workplace
  • allow reasonable paid leave of absence to enable such 'excluded employees' to set up a standard PRSA, subject to work requirements
  • make deductions from payroll at employees request

3.4 Contributions paid to a PRSA benefit from tax relief at an individual's marginal rate. Relief will also be given from PRSI and the Health Levy.

3.5 When an employer deducts qualifying PRSA contributions from an employee, the net pay arrangement will apply. This means that PAYE, PRSI and Health Levy deductions will be calculated on the employees' wages or salaries net of PRSA contributions. The 'net pay' basis may be operated once the employer holds a PRSA net pay Certificate.

3.6 The employee must provide employer with PRSA 1 (Net Pay) Certificate in order to avail of the net pay arrangement.

Those who are paying into their PRSA by direct debit are also entitled to tax relief up to a certain limit and they can apply for this at the end of each year.

3.7 Where a person makes a contribution towards a pension product in accordance with the provisions of Section 35 of the Social Welfare (Consolidation) Act 2005 in any contribution year commencing after 1st January 2003 the amount of PRSI paid on the portion of the pension contribution that is allowable as a deduction for income tax purposes (the allowable pension payment) may be returned. The refund will be calculated at the rate at which the PRSI contribution was paid.

3.8 The PRSA holder is generally provided with a PRSA Certificate and with this certificate they can obtain one of the following from the Revenue Commissioners depending on the circumstances.

  • PRSA 1 (Net Pay) Cert - This is issued where employer deducts contributions from salary and must be given to the employer to enable him/her to operate the Net Pay arrangement.
  • PRSA 2 (Net Pay) Cert - This is issued where a contributor is paying AVCPRSA Contributions from salary and must be given to the employer to enable him/her operate the Net Pay arrangement.
  • PRSA 1 Certificate - This is issued where PRSA contributions are made directly by the contributor to the PRSA provider i.e. Direct Debit or Cheque.

4. ROLE OF SOCIAL WELFARE INSPECTORS IN RELATION TO PERSONAL RETIREMENT SAVINGS ACCOUNTS

4.1 Social Welfare Inspectors will expand their current role in relation to employer inspection work by monitoring compliance by employers with the Pensions (Amendment) Act 2002. An employer who does not operate a pension scheme with retirement benefits for employees or whose scheme limits membership is obliged to provide access to at least one PRSA for his/her employees. Inspectors will notify the Pensions Board, in writing, where in the course of employer inspection work, non compliance by employers, in this regard, is suspected.

4.2 Once notified the onus is on the Pensions Board to follow up and ensure compliance, where necessary.

4.3 In the event of being queried by an employer with regard to PRSA provision refer all queries to the Pensions Board at:

PRSA@pensionsboard.ie
PRSA Unit (01) 613 1900

5. POWERS OF SOCIAL WELFARE INSPECTORS

IN GENERAL, THE APPOINTMENT, POWERS AND DUTIES OF SOCIAL WELFARE INSPECTORS IS DEALT WITH IN SECTION 250 OF THE SOCIAL WELFARE (CONSOLIDATION) ACT 2005.

5.1 All inspectors should be familiar with these and it is advisable to always carry the laminated extracts provided. The purpose of the inspection should be given, particularly in the case of an un-notified visit.

5.2 Inspectors have defined duties and powers. These powers are set out in the Social Welfare (Consolidation) Act, 2005.

5.3 Legislation introduced in the Social Welfare (Consolidation) Act 2005 enables inspectors to verify that employers have entered into a contract with a PRSA provider so that access to at least one Standard PRSA will be available for all 'excluded employees'.

Excluded Employees are:

  • Employees of an employer who does not offer an occupational pension scheme, or
  • Employees who are included in an occupational pension scheme for death in service benefits only i.e. where retirement benefits are not provided for, or
  • Employees who are ineligible to join the scheme and who will not, under the rules, become eligible to join the scheme for pension benefits within six months from the date they commenced employment
  • Employees who do not have access to Additional Voluntary Contributions (AVC's) through their occupational pension scheme

5.4 Section 250 of the Social Welfare (Consolidation) Act 2005

Chapter 3 - Appointment and Duties of Social Welfare Inspectors

A social welfare inspector shall, for the purposes of this Act or section 121(1)(a) of the Pensions Act 1990 have power to do all or any of the following -

(a) enter, without prior notification, at all reasonable times, any premises or place liable to inspection under this section,

(b) in such premises or place-

(i) to make such examination or enquiry,

(ii) to inspect and take copies of or extracts from any records (including in the case of information in a non-legible form a copy of or extract from such information in permanent legible form), found there, and

(iii) to remove and retain such records for such period as may be reasonable for further examination,

as may be necessary to ascertain whether the provisions of this Act are being complied with and while making any examination or enquiry to ascertain whether the provisions of Chapter 2 of Part II are being complied with shall also have power to examine or enquire as to whether section 121(1)(a) of the Pensions Act 1990 is being complied with and to report, if necessary, to the Pensions Board.

6. ACTION TO BE TAKEN

6.1 Every Employer Inspection should include a PRSA inspection.

6.2 Inspectors should satisfy themselves that a PRSA contract has been entered into with an agreed provider.

List of agreed PRSA providers - Appendix 1

6.3 Designation Certificate

Designation Certificates are generally given by PRSA Providers to employers who sign up with them to provide PRSA access. These Certificates should be retained by the contributor as evidence of contributions made and to enable a contributor to complete their return of income and claim for tax relief. However the provision of a designation certificate is not prescribed in the legislation and as such is at the Providers discretion. If the employer does not have a designation certificate they will have a copy of the contract entered into with the PRSA Provider or a letter from the Provider confirming their appointment.

The designation certificate or contract is not prescribed and will not necessarily follow the same format between Providers.

6.4 Form IN128

Form IN 128 should be completed in all cases.

Compliant Cases

Original IN 128 should be retained by SWI with Form IN 17.

Non-Compliant Cases

The Pensions Board should be notified via RDO, Floor 3, 157 - 164 Townsend St. in all cases of suspected non-compliance, therefore, original Form IN 128 to Pensions Board (via RDO) and copy retained with IN17.

The Pensions Board will act in all cases where reports of suspected non-compliance are received.

IN 128 FORMS ARE AVAILABLE FROM CENTRAL STORES, SANTRY, DUBLIN 9, and available in elctronic format in PC Shared Drawer SHR_RDO_Docs on cstow0002.

Accordingly, Inspectors should incorporate this aspect of inspections into their work once they have completed PRSA training.

6.5 ERIN Procedures

(i) All PRSA inspections should be fully recorded on ERIN.

Enter and clear inspection as normal.

(ii) Completed Form IN128 should be entered as separate item of work:-

ERIN Investigation Type PRSE - PRSA Enquiry Employer

(iii) Clear using appropriate outcome code

PCP - PRSA Complaint or,
PNC - Suspected PRSA Non-Compliant - Sent To PB

(iv) Destination LO 808 - Regional Directors Office (RDO)

Appendix 1

PRSA AGREED PROVIDERS

  • Ark Life Assurance (Ireland) Ltd.
  • Canada Life Assurance (Ireland) Ltd.
  • Custom House Capital Ltd.
  • Eagle Star Life Assurance Co. of Ireland Ltd.
  • EBS Building Society
  • Friends First Life Assurance Co. Ltd.
  • Hibernian Life and Pensions Ltd.
  • Irish Life Assurance plc.
  • New Ireland Assurance Co. plc./Bank Of Ireland Life
  • The Standard Life Assurance Company

Appendix 2

DEFINITIONS

Definition of "contract of employment" under the Pensions Acts, 1990 - 2004

a contract of service or apprenticeship, or any other contract whereby an individual agrees with another person, who is carrying on the business of an employment agency within the meaning of the Employment Agency Act, 1971, and is acting in the course of that business, to do or perform personally any work or services for a third person (whether or not the third person is party to the contract), whether the contract is expressed or implies or if express, whether it is oral or in writing;

Definition of "Employee" under the Pensions Acts, 1990 - 2004

employee means a person of any age who has entered into or works under (or, where employment has ceased, entered into or worked under) a contract of employment and references, in relation to an employer, to an employee shall be construed as references to an employee employed by that employer; and for the purposes of this Act, a person holding office under, or in the service of, the State, (including a civil servant, within the meaning of the Civil Service Regulation Act, 1956) shall be deemed to be an employee employed by the State or Government, as the case may be, and an officer or servant of a local authority for the purposes of the Local Government Act, 1941, or a harbour authority, a health board or a vocational education committee shall be deemed to be an employee employed by the authority, board or committee, as the case may be;

Definition of "Employer" under the Pensions Acts, 1990 - 2004

employer in relation to an employee, means (except in Section 49 and in Part VII) the person with whom the employee has entered into or for whom the employee works under (or, where the employment has ceased, entered into or worked under) a contract of employment subject to qualification that the person who under a contract of employment refer to in paragraph (b) of the definition of "contract of employment" is liable to pay the wages of the individual concerned in respect of the work or service concerned shall be deemed to be the individual's employer.

"Additional Voluntary Contributions (AVC's)"

- Voluntary pension contributions made by a member of a pension scheme over and above the amount of contributions (if any) that are required under the rules of the scheme.

One type of Additional Voluntary Contributions or AVC is designed as a cheap life insurance cover provided through Unions or Staff Associations. This is one type of AVC and it merely increases the death-in-service benefits. It is a very cost effective way of providing life cover but that is all it does. If a company pension scheme only allows for the purchase of this type of AVC the employees should be regarded as "excluded" and must be given access to a PRSA.

The other type of Additional Voluntary Contribution, is one designed to increase actual Pension benefits. This facility is most often used by late entrants to a company pension scheme in order to catch up and make full use of tax breaks available. If a company pension scheme has a facility for members to purchase this type of AVC then they would not be regarded as "excluded" employees.

"Excluded Employees":

  • Employee of an employer who does not offer an occupational pension scheme, or
  • Employees who are included in an occupational pension scheme for death in service benefits only i.e. where retirement benefits are not provided for, or
  • Employees who are ineligible to join the scheme and who will not, under the rules, become eligible to join the scheme for pension benefits within six months from the date they commence employment
  • Employees who do not have access to Additional Voluntary Contributions (AVC's) through their occupational pension scheme.

Last modified:07/07/2010
 

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