Authors: Dr Kurt Hyzler & Nico Fauser
The ‘Retirement Pensions (Cross-Border Activities and Cross-Border Transfers) Regulations (the “Regulations”) came into force on 13th March 2020 by means of Legal Notice 48 of 2020. The Regulations transpose certain provisions of Directive (EU) 2016/2341 (the “Directive”), more commonly referred to as the IORP II Directive. While many of the Directive’s provisions have as their main objective the provision of adequate protection of members and beneficiaries of occupational retirement schemes, the Directive also intends to further facilitate pension schemes by reducing barriers to cross-border activity, with the aim of encouraging cross-border pension provisions.
Definition of Institutions for Occupational Retirement Provision
The Regulations define an institution for occupational retirement provision (“IORP”) as a retirement scheme which receives contributions from an employer (“Sponsoring Undertaking”) and which provides benefits to the employees of the Sponsoring Undertaking. While the Sponsoring Undertaking is separate from the IORP in order to safeguard the interest of the members of the latter, the Sponsoring Undertaking funds the scheme. A Maltese institution for occupational retirement provision (“Maltese IORP”) requires a licence issued by the Malta Financial Services Authority (“MFSA”) in terms of Article 4 of the Retirement Pensions Act (the “Act”).
The Regulations regulate the following two main matters:
- cross-border activities carried out by IORPs; and
- cross-border transfers of IORPs.
Cross-Border Activities carried out by IORPs
In terms of the Regulations, an IORP located/licensed in Malta (“Maltese IORP”) would be deemed to be carrying out cross-border activities where the Maltese IORP accepts sponsorship from a sponsoring undertaking based in a Member State or EEA State other than Malta (“European Sponsoring Undertaking”).
The Regulations provide that prior to sponsorship acceptance from a European Sponsoring Undertaking, a Maltese IORP is obliged to provide the MFSA with the following information:
- the name of the Member State whose social and labour law is applicable to the relationship between the sponsoring undertaking and members;
- the name and location of the main administration of the sponsoring undertaking; and
- the main characteristics of the occupational retirement plan to be operated for the sponsoring undertaking.
Following receipt of the required information, the MFSA is to communicate such details to the competent authority of the Member State in which the European Sponsoring Undertaking is based (“EU Authority”) within a three (3) month period. The EU Authority shall then have a six (6) week period to inform the MFSA of the requirements of social and labour law applicable to the European Sponsoring Undertaking.
In terms of the Regulations, where an IORP based in a Member State or EEA State other than Malta (“European IORP”) intends to receive sponsorship from a Sponsoring Undertaking based in Malta, the European IORP must provide its EU Authority with the same information as stated above, and the respective authorities shall comply with the same time frames mentioned above.
Cross-Border Transfers of IORPs
A cross-border transfer takes place when an IORP transfers all or part of its assets and liabilities to an IORP based in another Member State or EEA State.
The Regulations provide for two scenarios of cross-border transfers:
- where a Maltese IORP transfers its assets and liabilities to a European IORP;
- where a European IORP transfers its assets and liabilities to a Maltese IORP
In the first scenario, where a Maltese IORP intends to transfer its assets and liabilities to a European IORP, such transfer shall require the following:
- the authorization of the EU Authority of the European IORP;
- the prior consent of the MFSA;
- prior approval by a majority of members and beneficiaries of the Maltese IORP (the information regarding the transfer is to be provided to the members by the Maltese IORP); and
- where applicable, prior approval by the sponsoring undertaking.
After obtaining the above approvals, the Maltese IORP is to provide evidence of such approval to the European IORP. The European IORP must then submit an application for authorization of the transfer to the relevant EU Authority. The application shall consist of:
- the written agreement entered into between the Maltese IORP and the European IORP setting out the conditions of the transfer;
- a description of the main characteristics of the occupational retirement plan;
- a description of the liabilities or technical provisions to be transferred, and other obligations and rights, as well as corresponding assets or cash equivalent thereof;
- the names and places where the main strategic decisions of the Maltese IORP and the European IORP are made, and the Member State in which the Maltese IORP and the European IORP are registered or authorised;
- the location of the main administration of the sponsoring undertaking and the name of the sponsoring undertaking;
- evidence of the approval obtained by the members and beneficiaries of the Maltese IORP; and
- where applicable, the names of the Member States whose social and labour law relevant to the field of occupational pension schemes is applicable to the occupational retirement plan concerned.
Once received by the EU Authority, the above application will be forwarded without delay to the MFSA. The MFSA will then have an eight (8) week period from receipt of such application, to assess the transfer, following which the MFSA will communicate the results of the assessment back to the EU Authority. The EU Authority must then inform the MFSA of its decision to grant or refuse the authorization of the transfer, within two (2) weeks of the said decision being taken.
The Regulations emphasize that in the case of a cross-border transfer, the Maltese IORP shall ensure that the costs of the transfer are not incurred by the remaining members and beneficiaries of such transferring IORP.
The same formalities outlined above shall be applicable in the second scenario, where a European IORP intends to transfer its assets and liabilities to a Maltese IORP. The competent authorities of both the transferring and receiving IORPs shall also communicate and comply with the same time frames outlined above.
In the case of any disagreements on the procedure or content of a cross-border transfer, such disagreements shall be referred to the European Insurance and Occupational Pensions Authority (EIOPA) which will conduct non-binding mediation on the matter.