Major problem defining exempt employment under AE scheme?

[Colm Fagan]

It seems that the Department of Social Welfare (DSP) faces a potentially insuperable problem in relation to defining exempt employment under the AE scheme.
The purpose of Section 51 (Exempt employment) and Section 52 (Standards for purposes of Section 51) of the AE Act is to exempt employments which offer equivalent or better benefits than will be provided under the scheme.
That could pose insuperable problems for DC (or DB) schemes where contributions (and/or benefits) are determined by reference to pensionable earnings, i.e., earnings less an offset for Social Welfare entitlement. The high-level objective of the offset is to provide an adequate pension, inclusive of the individual's state flat-rate pension entitlement.
It's many a long year since I was at the pensions coalface but I calculate that the pensionable earnings for someone in a scheme which aims to deliver a pension of 2/3 of earnings, inclusive of state flat-rate entitlement, will be earnings less €21,600 a year (€277.30*52*1.5).
Suppose the employer's contribution under an existing occupational scheme is 15% of pensionable earnings, that's equivalent to 9.6% of earnings for someone earning €60,000 a year, but it's only 4.2% of earnings for someone earning €30,000 a year. (Correct me if my sums are wrong). So, is the €60k earner exempt from mandatory inclusion in the AE scheme but the €30k earner must be included? What happens when/ if someone crosses the earnings threshold?

PS: I should have added that they don't face the same problem in the UK (or at least not to the same extent) because the UK already has an offset for flat-rate state pension entitlement. Only earnings between £6,240 and £50,270 qualify for AE.

 

[Duke of Marmalade]

Well DB schemes do not provide equivalent benefits - full stop. A lot is being left to regulations so I suppose a pragmatic approach will be taken. Irish Life have flagged for example the typical use of probation periods which would not be equivalent to AE.

 

[Towger]

Revenue collect payroll data in real time. Once they see a qualifying employee ( on age and earnings across all their employments) and don't see a pension payment via payroll or the employee claiming a pension credit for a private pension, they will tell the CPA (or whatever the current name is) to enroll the employee.

At the moment they are not interested in benefit levels. Just that an employee has a pension.

 

[Colm Fagan]

Hi @Towger If only it were that simple! Suppose the sample scheme I mentioned is non-contributory. Then, there will be no pension deduction

 

[Towger]

Hi @Towger If only it were that simple! Suppose the sample scheme I mentioned is non-contributory. Then, there will be no pension deduction

Them they will be auto enrolled. I don't think there are many such schemes with no contributions at all. Church of Ireland Clergy maybe, but they are on their own PRSI Class.

 

[cally1990]

Isn't there any also a huge problem with the methods used for determining employee V self employed

They said they will be using the previous 13 weeks payroll data and employees are under class A

However , you could have an employee under class A leave their employment and become a proprietary director of a LTD company and paid under PAYE and Class S

This type of employment is huge in the professional contracting industry in Ireland

Therefore as soon as the director draws their first salary from the ltd company , and their previous payroll records are showing class A (and not enrolled or enrolled , doesn't matter ) they will get caught up in the scheme where they should be exempt because they are now class S but they are only using payroll data from previous payrolls in the past 13 weeks to make the determination

It's like they forgot about proprietorship directorship in all this and only thought about sole traders , people change employment type alot and use these types of employment models/status for contracting

 

[Towger]

Revenue will see the Class S as soon as they are paid as a director. They are also looking for no pension contributions or claiming pension tax credit in the previous weeks data. I don't see it as a big issue, it is certainly better than the UK system which has a huge admin overhead on employers.

 

[cally1990]

Revenue will see the Class S as soon as they are paid as a director. They are also looking for no pension contributions or claiming pension tax credit in the previous weeks data. I don't see it as a big issue, it is certainly better than the UK system which has a huge admin overhead on employers.

Because the AE decision will be made BEFORE the payroll is being run and will mandate they are included in the scheme but they should be exempt, they aren't seeing the prsi class S BEFORE the payroll , only afterwards which is too late.

Which then opens to the questions to refunds for deductions in error due to misclassification

 

[Towger]

Which then opens to the questions to refunds for deductions in error due to misclassification

Is sounds like an edge case, where someone initially qualifies and then in week or two does not, but gets Auto Enrolled in the limbo period.
They can just opt out, like anyone else. The same if an employee meets the salary requirements, but then has a drop in earning.