1. Presentation for Multi-Employer Plan Administrators Certain Aspects of the Cayman Islands National Pensions Law March 2008

2. Presentation Outline Administrators National Pensions Office National Pensions Board Expectations of Administrators –Registration renewals/Pennat data –Delinquency reports –Payment plan tracking –Arrears and interest Guidance Pension Providers’ Association Review of the Law First reviewed a number of these items at June ’05 MEP Administrators’ meeting – presentation on NPO website under “more about NPO” Document Library.

3. Plan Administrators Some Definitions: –“administrator” means a person who manages a pension plan –“approved provider” means an insurance company or other company licensed to undertake pension plans in the Islands –“multi-employer pension plan” means a pension plan established and maintained for self-employed persons or employees of two or more employers who contribute or on whose behalf contributions are made to a pension fund, but does not include a pension plan where all the employers are affiliates –“pension committee” means a committee that is the administrator of a pension plan

4. Who may Administer Pension Plans in the Cayman Islands (a)an employer; (b)a pension committee at least fifty per cent of which shall be representatives of members of the pension plan and a majority of which shall hold Caymanian status or be permanent residents of the Islands; (c)an approved provider where that provider provides all of the benefits under the pension plan, or a representative or agent of that provider; (d)a board of trustees appointed pursuant to the pension plan, at least fifty per cent of which shall be representative of members of the pension plan and a majority of which shall hold Caymanian status or be permanent residents of the Islands; (e)a board, agency or other person made responsible by this Law or any other law for the administration of the pension; or (f)a trust company licensed in accordance with the Banks and Trust Companies Law (1995 Revision). Who’s in the room? Administrators or Agents or Both?

5. National Pensions Law - history The Law establishes minimum standards for pension plans operating in the Cayman Islands – it onto itself is not a “pension plan” and provides no benefits National Pensions Law became effective July 1, 1998 for all Caymanians Effective January 1, 1999 for expatriate employees (except domestics employed to work in individual homes) Some plans “grandfathered” Top up plans permitted to operate Pension Participation is Mandatory Therefore, a Condition of Employment In the Cayman Islands

6. National Pensions Board/Office 1998 – 2002 (2 employees – Superintendent & Administrative Officer) Implementation, initial registration, renewals, guidance notes, forms, form letters, enforcement, education and public relations 2002 – 2004 (2 employees – Acting/Interim Superintendent & Officer) Registration renewals, maintenance, legal advise re: prosecutions, system development (Pennat), public meetings re: review of National Pensions Law 2004 – 2006 (3/4/5/6 employees – added Deputy, Administrative Officer, and 2 Inspectors/Investigators) Implemented electronic System, system enhancements, review of processes, procedures and correspondence, Law review, Offshore Pension Plan Registration Feasibility Study, consultancy project, enforcement/prosecution 2007 – onwards (7/8 employees – added Inspector/Investigator, Receptionist – shared with HIC) Law amendments, consider consultancy project recommendations, enhance systems, revisit Law amendments, enforcement & prosecutions, implement strategic communications initiative, communicate – communicate - communicate

7. National Pensions Board Established by Section 78 of National Pensions Law Consists of a Chair and Deputy Chair and an additional 5 – 9 members Appointed by the Governor and to be Gazetted Current Board appointed October 2007, staggered terms of 1 – 3 years Superintendent of Pensions is chief administrative officer of the Board Governor may, by direction, designate functions of the Board for effective administration of the Law

8. National Pensions Board (Office) Duties of the Board (Section 80 & 81 of National Pensions Law): –Administer the Law and Regulations; –Promote the establishment, extension and improvement of pension plans throughout the Islands; –Advise the Minister in respect of the business of the Board; –Make recommendations to the Minister in respect of pension plans; –Conduct surveys and research programmes and compile statistical information related to pensions and pension plans; –Report annually to the Minister on the business of the Superintendent & the Board; and –Request information or an appraisal of assets from an employer, an administrator or any other person (member of a pension plan) within specific time constraints, otherwise face penalties.

9. National Pensions Office/Board Achievements: National Pensions Office is having some success in gaining employer’s compliance with Law Automated electronic system (Pennat) is coming on-line and management information will be forthcoming Steps taken by National Pensions Office and Solicitor General/Attorney General’s Department with respect to enforcement of the Law and prosecutions Increase in resources of National Pensions Office Development of National Pensions Office (and Board’s) web site Steps undertaken by Office to improve reporting by pension providers and enhancement of public education The Consultancy Project has been completed The review of the Law is almost completed by the Board

10. National Pensions Office/Board The office is attempting to develop a set of Standard Operating Procedures (SOP) to guide in the enforcement of the Law. There is recognition that a SOP must have some flexibility to deal with specific circumstances. The Office and Board recognizes there is still a great deal to do to ensure the success of the Cayman Islands National Pensions System and it acknowledges the cooperation and the support that the Ministry has provided and is counting on continued support into the future. Additionally the Office and Board recognize that more cooperation and assistance from Administrators and their agents must be secured to have an efficient and effective pension system in the Cayman Islands.

11. Growth of Pension Funds

12. Board’s Expectations of Administrators Ensure plan terms and plan administration conform with minimum requirements of the Law That administrators cooperate and assist the NPO and NPB in ensuring that employers and employees observe requirements of the Law Assist with advancement of Pension Plans in the Islands Assist with education on need for pension planning and financial planning in general That any agent contracted by the administrator respect the requirements that the Law places on administrators and the expectations of the NPB

13. Requirements the Law Places on Administrators 16.(1) An administrator shall ensure that- (a) the pension plan and pension fund are administered in accordance with this Law and the regulations; and (b)the pension plan and any amendment to the plan are administered in accordance with the documents filed with the Superintendent upon registration of such plan or amendment. 17. (1) An administrator shall- (a) exercise the care, diligence and skill in the administration of a pension plan and in the management and investment of the pension fund that a person of ordinary prudence would exercise in dealing with the property of another; and (b) use in the administration of a pension plan and in the management and investment of a pension fund all relevant knowledge and skill that, by reason of the administrator’s profession, business or calling, he ought to possess’

14. Requirements the Law Places on Administrators 17 (An administrator shall): (3)”employ one or more agents – actuaries, accountants, investment professionals, etc.” (4) “these become deemed agents of the administrator” (5) An administrator who employs an agent shall- (a) personally select the agent; (b) be satisfied of the agent’s suitability to perform the acts for which the agent is employed; and (c) supervise the agent as far as practicable and reasonable. (6) An agent of an administrator is subject to the standards that apply to the administrator under subsections (1) and (2).

15. Requirements the Law Places on Administrators 48.(1) The administrator or an agent of an administrator shall notify the Superintendent in writing of any contribution which is in arrears within forty-five days of becoming aware that such contribution has not been paid. (2) Where the Superintendent is notified in accordance with subsection (1), the Superintendent shall direct the relevant employer to pay the arrears within two weeks, failing which the Superintendent may commence or direct the administrator to commence proceedings in a court of competent jurisdiction for the recovery of the arrears. 49. (5) An administrator has a lien and charge on assets of the employer in an amount equal to the amounts deemed to be held under subsections (1), (3) and (4).

16. Additional Expectations of Administrators That administrators participate in and monitor employers’ compliance with payment plans agreed to under the terms of the NP Law That registration renewals are submitted on time and that documentation is complete That requests by the Board and/or the Office are acknowledged and information sought is provided within time limits requested That plan administrators support the operation and development of Pennat and provide accurate data to populate it with That administrators’ agents take responsibility for the terms of their plan and “learn” the provisions of the Law and how they may reflect on the terms of their plan

17. 2. Information Requests Renewal of Registration: –Active versus inactive members please report both numbers Employer Data –List of active and inactive employers for our complaint tracking system (Pennat) Cut off date –Monthly Reports of Changes

18. 3. Delinquency Reports Submission –Requirement of the Law – Section 48 (1) –Timing : “within 45 days of becoming aware that such contributions has not been paid” –Our Expectations: January contributions are due 15 th February On the 16 th Feb, administrator or their agent must be aware 45 days to report, NPO notified by the 30 th March Monthly reports –Accuracy is CRITICAL.

19. 3. Delinquency Reports (2) Format –Desirable to have a consistent reporting format, Pennat compliant –Format to be developed with: Pension Providers Association or Plans willing to work together on this subject or NPO will tell you the format. –Decision?? Follow Up –NPO to be advised if payments received following remittance of report This is the expectation of the National Pensions Office and the Board that administrators wanting to have their plans registered/renewed in the Cayman Islands must meet these requirements.

20. 4. Calculation of Arrears Arrears –NPO will compile eligibility list, in most cases –Administrator will calculate arrears –Administrator, then NPO, will collect payroll info from employer If employer did not deduct pension contributions and this can be substantiated, then arrears calculation can be based on only 5%.

21. 5. Tracking of Payment Plans All payment plans require approval of NPO NPO to notify administrator or their agent when payment plans agreed – do you want to be involved? Responsibility of administrator or their agent to commence tracking payment plans Notify NPO of payment or non payment, without being requested Our suggested method: Delinquency Report – add section for this information Other options?

22. 6. Calculation of Interest Interest –Requirement of the law – not optional! –Section 50: “An employer shall be liable to pay interest to a pension fund on all money that is due to be paid by him to that pension fund at the current prime rate in the Islands plus five percent, calculated on a daily basis.” –Timing: January contributions are due 15 th February On the 16 th Feb, interest starts accumulating –Interest accrues on both the employer and employee pension contributions –Administrators are responsible for calculating and collecting interest as well as notifying the employers of the amount. This is the expectation of the National Pensions Office and the Board that administrators wanting to have their plans registered in the Cayman Islands will follow these requirements

23. 7. Guidance Death Benefits Pre RetirementPost Retirement Married with or without kids: all benefits to the spouse – not the kids Married with kids: 100% paid to spouse with 50% for the kids. Married without kids: spouse Unmarried: Named beneficiary

24. 7. Guidance (2) RSA Disbursements –Amounts in CI Dollars –If plan is in US, please convert. Voluntary Contributions –Identification needs to be made –Part of administrator’s job –Work with employer to obtain this information Year’s Maximum Pensionable Earnings –Track by calendar year

25. 7. Guidance (3) Refunds –Law does not differentiate Caymanians and expatriates –Amounts under CI$5,000 Plan’s discretion to pay Your trust deed and rules govern this provision Why are these people being sent to the NPO? –Amounts over CI$5,000 3 requirements –Employment must be terminated –No contributions for 2 years –Residence ceased (absent for 6 months)

26. 7. Guidance (4) Plan transfers –Former plan prepares a report for the new pension plan and the NPO Detail the payments received & the delinquent payments. Report should include the effective date In cases where there are arrears, new provider must accept the responsibility to work with the employer and the NPO –Employees: Decide whether or not to transfer their accumulated contributions If transfer requested, former provider must complete within 45 days of request. Delinquent contributions will be paid to the new provider –Employer: Send letter to former provider and NPO notifying both of change inc. effective date. –Check our website, www.npo.gov.kywww.npo.gov.ky

27. 7. Guidance (5) Enrollment of members –Signed membership cards are not required; ideal –Employer can provide full name, date of birth –Beneficiary is the member’s estate –Member can come in and amend details later Any other topics?

28. 8. Pension Providers’ Association Comprised of “most” of the Multi Employer Plan Administrators, all should be a party to it as the requirements placed will be identical. Public Sector Pension Plan Administrators have been an invited observer. Has been formally established, however is currently inactive Due to nature of industry (including competition amongst providers), Association needs some “generic” assignments if it is going to survive. Guidance notes Law review Investment guidelines Actuarial review Formalized SIP&G Investment reporting guidelines Self - regulation or subject to audit Educational opportunities – trustees/administrators/members National Pensions Office recognizes that there is value in such an organization and is willing to facilitate meetings, if requested.

29. 9. Review of the Law Update Board has completed the Law Review –To be submitted to the Ministry –Minister will review and may make changes –Ministry will handle submission to Cabinet, Legislative Drafting and Legislative Assembly –Ministry has Mercer recommendations and some from the NPO Regulations still need to be addressed

30. 9. Review of the Law Update (2) Highlights –All businesses will notify NPO when starting to hire employees –Annual General Meetings will be a requirement for all plans –Trustee training will be required –All employees pensionable after 6 months; Caymanians remain as immediately –Death benefits will be divided between spouse and dependent kids –No refunds under CI$5,000 –Timing for delinquent reports will be reduced

31. Questions ? ? ? www.npo.gov.ky