GMP Equalisation Under the Microscope – Scoping out the Journey


Shortly after the High Court’s decision now referred to as “Lloyds 3“, which considered the issue of guaranteed minimum pension (GMP) equalisation and the extent to which past transfers-out should be revisited, we published a summary of the decision and our initial reaction.

In this series of blogs, we have put under the microscope some of the key issues raised by the Lloyds 3 decision, including some of the unanswered questions and practical difficulties that trustees will face in tackling GMP equalisation issues. Because of the complexities involved, with the best will in the world the majority of trustee boards will find that it will not be practicable to fully address all the potential GMP equalisation risks facing their scheme. In this blog, we go from “microscope” to “telescope” and examine the steps trustees might consider taking to prevent this reality from interfering with their long term objectives for securing liabilities outside their scheme. Continue Reading

The Pensions Single Code – Scatter the Clouds

Rainy Grey Cloud

Getting started on a project is often the most difficult part. If I put off doing something (personally or professionally) the task looms over me like a little black cloud, and somehow that cloud seems to get bigger every time it enters my thought process. In a cartoon-like manner, the cloud starts to follows me around, getting darker and threatening rain. It then starts to multiply.

If you are a pension scheme trustee or a pensions manager, The Pensions Regulator’s (TPR) single code of practice could be something that is looming over you in a similar way. TPR’s interim response to its consultation was short and sweet. We know that TPR is dropping its proposed 20% limit on unregulated investments due to the unintended impact on some large pension schemes. We also know that it is reconsidering aspects of the Own Risk Assessment and it is exploring how the single code could be better presented for public service schemes. Additionally, we know that the single code is now expected to be laid before parliament in spring 2022 and to become effective in summer 2022. But the main thing that we know, is that there is a lot to do, and all schemes will need to assess where they stand in terms of compliance and plan how to fill the gaps. Juggling this with the many and varied other commitments that you have, means that it will be a long-term project. Continue Reading

GMP Equalisation Under the Microscope – Bulk Transfers Will Require Close Examination


The recent court ruling known as “Lloyds 3” answered lots of questions about the need to revisit past transfer payments, where those transfer payments had been calculated without taking into account the obligation to equalise benefits for the effect of unequal guaranteed minimum pensions (GMPs). However, the more we look at Lloyds 3, which focused on the obligations of the trustee of a number of pension arrangements connected with the Lloyds Banking Group, and try to apply it to the real life history of other schemes, the more we see the judgment has left pension scheme trustees with a number of unanswered questions.

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We’re Invested in What?


If you are a trustee, have you ever had one of those letters or emails questioning your investment strategy? I don’t mean questions about de-risking triggers, the security of counterparties or even strategic asset allocation queries, which are the stuff of trustee meetings. The type of enquiry I am referring to is the persistent member or activist (who are increasing in numbers in our experience) who is focused on the propriety of a scheme’s investment in either specific stocks, industries (fossil fuels are extremely popular for this sort of communication) or even countries (a Supreme Court judgment last year highlighted the sensitivity of the Local Government Pension Scheme (LGPS) to this type of exposure).

Such communications generally end with something between strong encouragement and a request to divest as soon as possible from the offending investment(s). Accepting that trustees generally do not have access to PR agencies or corporate affairs departments, what should trustees do when faced with such communications?

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GMP Equalisation Under the Microscope – Focusing in on Data Gaps


“Big Data” is a topic that is frequently referred to in the news.  The traditional definition of Big Data is data that contains greater variety, arriving in increasing volumes and with ever-higher velocity.  Whilst this definition isn’t typically of direct relevance to trustees of UK occupational pension schemes, it does have some application in the context of guaranteed minimum pension (GMP) equalisation.

Trustees are already grappling with scheme data in connection with the submission of data scores to the Pensions Regulator as part of their scheme returns.  In addition, data issues are high on many trustee agendas, for example, when addressing data security and data privacy obligations, or looking ahead to the information to be provided to pension dashboards.  Following the recent High Court decision on the issue of GMP equalisation and historical transfers – a ruling commonly referred to as “Lloyds 3” – trustees have a potential further headache regarding scheme data to deal with.

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Free And Extended COBRA Coverage Under The American Rescue Plan Act Of 2021: Update

Section 9501 of the American Rescue Plan Act of 2021 (the “ARPA”)[1] requires certain employers to offer free COBRA coverage to certain individuals between April 1, 2021 and September 30, 2021.  The ARPA provides tax credits to employers to offset the cost of the COBRA coverage.  The right to free COBRA coverage extends to some individuals whose right to COBRA coverage previously ended.

The original version of this blogpost, written shortly after passage of the ARPA, reviewed eligibility free coverage and extended coverage, how the tax credits work, and potential issues pertaining to insurance coverages.  On April 7, 2021, the Department of Labor (the “DOL”) issued guidance on the law in the form of “Frequently Asked Questions” and various model notices that can be used in connection with the law.[2]  This post reflects the DOL’s recent guidance.

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GMP Equalisation Under the Microscope – Proactivity Under the Lens


GMP Equalisation and Underpaid Cash Equivalent Transfer Values – Will Trustees Have to Trace and Compensate Members Proactively, or Can Trustees Wait for Claims?

Shortly after the High Court decision commonly referred to as “Lloyds 3”, which considered the issue of guaranteed minimum pension (GMP) equalisation and the extent to which past transfers out should be revisited, we published a summary of the decision and our initial reaction. We continue to look at some of the key issues raised by the Lloyds 3 decision in a series of blogs. In this blog, we will consider the question of whether, and to what extent, trustees have to be “proactive” in seeking, finding and topping up cash equivalent transfer values that were underpaid as a result of a failure to equalise for the effect of unequal GMPs.

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TPR Tightens the Governance Net in its New Code of Practice

Stacked TrianglesIf you were under the impression that the single code of practice would be a consolidation of existing codes, then the content of this blog will come as a surprise!

The Pensions Regulator (TPR) has published a consultation on the first phase of replacing the existing Codes of Practice with a single, online Code of Practice (the New Code). The first phase involves converting 10 of the existing Codes of Practice into 51 shorter, topic-based modules. The remaining five Codes of Practice (in relation to notifiable events, funding defined benefits, modification of subsisting rights, master trusts and the material detriment test) are expected to be added to the New Code in due course. TPR also plans to review its guidance in line with the New Code, starting later in 2021.

TPR decided to introduce the New Code in order to make its material easier to use and understand. The draft New Code also incorporates the new governance requirements set out in the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 (the Governance Regulations). The New Code is not a straight consolidation of existing Codes of Practice – updates have been made throughout to tighten up on governance requirements and to clarify TPR’s expectations on how standards should be met and how compliance should be evidenced. It is not safe to assume that an existing policy, practice or procedure would meet the standards expected in the New Code.

This blog highlights some of the key points to note from the New Code.

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American Rescue Plan Tax Credits for Employers Who Voluntarily Provide FFCRA Leave – Supplement

This is a Supplement to our post on March 24, 2021 regarding Section 9641 of the American Rescue Plan Act of 2021 (the “ARPA”). This Supplement addresses state and local governmental employers.

Section 9641 of the Rescue Plan makes available tax credits to offset the costs borne by certain employers who voluntarily provide emergency paid sick leave and emergency paid family leave to employees for certain types of covered absences occasioned by the pandemic, from April 1, 2021 through September 30, 2021.

Prior to April 1, 2021, no tax credits were provided for state and local government employers who were either required to provide leave under the Families First Coronavirus Response Act (FFCRA) during 2020, or did so voluntarily from January 1, 2021 through March 31, 2021.

However, Section 9641 of the ARPA does appear to extend the availability of tax credits to state and local governmental employers who voluntarily provide FFCRA leave from April 1, 2021 through September 30, 2021.

It appears that a state or local governmental employer must meet all of the relevant provisions of the FFCRA, as amended by the ARPA, in order to qualify for the credits, including the “nondiscrimination” rules contained in Internal Revenue Code Sections 3131(j) and 3132(j). Please see our March 24, 2021 post for additional details.

As of this date, the IRS has not updated Questions and Answers on its web site pertaining to FFCRA credits to reflect the passage of the ARPA. Thus, we have not seen an official acknowledgement of the foregoing. Thus, state and local governmental employers should stay tuned for further guidance from the IRS.

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American Rescue Plan Tax Credits for Employers Who Voluntarily Provide Paid Sick Leave and Paid Family and Medical Leave

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (the “Rescue Plan”).[1] This post reviews Section 9641 of the Rescue Plan, which makes available tax credits to certain employers who voluntarily provide paid time sick leave and family and medical act leave to employees for absences occasioned by the pandemic, from April 1, 2021 through September 30, 2021.

Section 9641 of the Rescue Plan is based on the paid sick leave and paid family and medical leave provisions that were effective April 1, 2020 through December 31, 2020, under the Families First Coronavirus Response Act (“FFCRA”).[2] Although the mandatory paid leave provisions of the FFCRA were not extended past December 31, 2020, the tax credits available under Section 9641 of the Rescue Plan are based on the framework of the FFCRA, with certain modifications.

This post will first review the FFCRA, and then explain how the Rescue Plan’s tax credits work.

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