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Irish Pensions Magazine Autumn 2016
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News
IORP II Directive
by Jerry Moriarty
T
he recently published IORP II Directive which
emerged from the EU’s Trilogue negotiations on 30
June 2016, will introduce new governance and disclosure
requirements for occupational pension plans within
the EU. It will also clarify the funding requirements for
cross-border schemes and introduce greater member
protection on cross-border transfers.
Background
The text for a new Directive on the activities and
supervision of IORPs was first proposed by the previous
European Commission in March 2014. The final text
recently emerged from Trilogue negotiations and
although the European Parliament is yet to give its
final approval (anticipated in November 2016), this is
expected to be a formality. Once it has final approval,
Member States will have 2 years to transpose the
requirements into national law. The main aspects of the
Directive are set out as follows:
Solvency & Funding
The Directive states that IORPs shall have an equitable
spread of risks and benefits between generations.
There are no new solvency rules for IORPs in the
Directive. In addition, the Directive states that “no
quantitative capital requirements such as Solvency II or
holistic balance sheet models derived therefrom should
be developed at Union level”.
Cross Border Schemes
Funding for cross-border schemes:
There has been
a relaxation in relation to the funding requirements
for cross-border schemes. Although schemes are still
required to be fully funded at all times, the Directive
now states that this condition may not always be met.
In such circumstances, the relevant national regulator
will be required to intervene and require the IORP to
draw up appropriate measures and implement them
without delay, in a way that members and beneficiaries
are adequately protected. A recovery plan may be put
in place where a cross-border scheme is underfunded.
This might make cross-border DB schemes a more
feasible option.
Cross-border transfers:
The Directive contains new
requirements that will apply to cross-border transfers.
These make it more difficult to transfer IORPs between
Member States in search of a more relaxed regulatory
environment. Some of the requirements include:
• To obtain the consent of the majority of the
members and the majority of the beneficiaries
(i.e. pensioners) concerned or the majority of their
representatives (which includes trustees)
• To obtain the prior authorisation of the competent
authorities in the home Member States of the
transferring IORP and the receiving IORP
• For the long-term interests of the members
and beneficiaries of the receiving IORP and the
transferred part of the plan to be adequately
protected during and after the transfer
• Regarding a partial transfer, for the long-
term interests of the remaining members and
beneficiaries to be adequately protected
• For the receiving IORP to be fully funded at the
date of the transfer
• For the assets being transferred to be sufficient
and appropriate to cover the liabilities, technical
provisions and other obligations or rights to be
transferred measured in accordance with the
rules in the home Member States of both the
transferring and the receiving IORPs